Abstract
I include a role for time preferences within a version of the Young (J Econ Theory 59:145–168, 1993b) evolutionary model of bargaining. With or without time preferences, the stochastic stable convention yields a generalized version of the Nash (Econometrica 18:155–162, 1950) Bargaining Solution. When time preferences are added to the model, agents’ discount factors enter into the stochastically stable convention in a natural manner. That is, an agent’s discount factor acts as a bargaining weight within the Nash Bargaining Solution. By taking appropriate limits, an evolutionary foundation for the Rubinstein (Econometrica 50:97–110, 1982) Bargaining Solution is provided.
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I thank Lew Evans, Jack Leach, Collin Starkweather, Aaron Strong, a referee and associate editor. All errors are my own.
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Robles, J. Evolution, bargaining, and time preferences. Economic Theory 35, 19–36 (2008). https://doi.org/10.1007/s00199-007-0227-6
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DOI: https://doi.org/10.1007/s00199-007-0227-6