Subgame perfect equilibrium in a bargaining model with deterministic procedures |
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Authors: | Liang Mao |
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Institution: | 1.College of Economics,Shenzhen University,Shenzhen,China |
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Abstract: | Two players, A and B, bargain to divide a perfectly divisible pie. In a bargaining model with constant discount factors, \(\delta _A\) and \(\delta _B\), we extend Rubinstein (Econometrica 50:97–110, 1982)’s alternating offers procedure to more general deterministic procedures, so that any player in any period can be the proposer. We show that each bargaining game with a deterministic procedure has a unique subgame perfect equilibrium (SPE) payoff outcome, which is efficient. Conversely, each efficient division of the pie can be supported as an SPE outcome by some procedure if \(\delta _A+\delta _B\ge 1\), while almost no division can ever be supported in SPE if \(\delta _A+\delta _B < 1\). |
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