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Folk theorems in a bargaining game with endogenous protocol

  • Shiran RachmilevitchEmail author
Article
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Abstract

Two players bargain to select a utility allocation in some set \(X\subset {\mathbb {R}}_+^2\). Bargaining takes place in infinite discrete time, where each period t is divided into two sub-periods. In the first sub-period, the players play a simultaneous-move game to determine that period’s proposer, and bargaining takes place in the second sub-period. Rejection triggers a one-period delay and move to \(t+1\). For every \(x\in X\cap {\mathbb {R}}^2_{++}\), there exists a cutoff \(\delta (x)<1\), such that if at least one player has a discount factor above \(\delta (x)\), then for every \(y\in X\) that satisfies \(y\ge x\) there exists a subgame perfect equilibrium with immediate agreement on y. The equilibrium is supported by “dictatorial threats.” These threats can be dispensed with if X is the unit simplex and the target-vector is Pareto efficient. The results can be modified in a way that allows for arbitrarily long delays in equilibrium.

Keywords

Bargaining Endogenous protocol Folk theorems 

Notes

Acknowledgements

I am thankful for Emin Karagözoğlu’s helpful comments, and for two exceptionally effective referee reports.

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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of HaifaHaifaIsrael

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