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Rubinstein bargaining with two-sided outside options

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Summary.

In this note we show that if in the standard Rubinstein model both players are allowed to leave the negotiation after a rejection, in which case they obtain a payoff of zero, then there exist a continuum of subgame-perfect equilibrium outcomes, including some which involve significant delay. We also fully characterize the case in which, upon quitting, the players can take an outside option of positive value.

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Authors and Affiliations

  1. CODE and Dept. d'Econ. i Hist. Econ., Universitat Autònoma de Barcelona, E-08193 Bellaterra, SPAIN, , , , , , ES

    Clara Ponsatí

  2. Institut d'Anàlisi Econòmica (CSIC), Campus UAB, E-08193 Bellaterra, SPAIN, , , , , , ES

    József Sákovics

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  1. Clara Ponsatí
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  2. József Sákovics
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Received: February 27, 1996; revised version: March 28, 1997

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Ponsatí, C., Sákovics, J. Rubinstein bargaining with two-sided outside options. Economic Theory 11, 667–672 (1998). https://doi.org/10.1007/s001990050208

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  • DOI: https://doi.org/10.1007/s001990050208

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