SITE Working Paper Series
No 8:
Commitment in Alternating Offers Bargaining
Topi Miettinen ()
and Andrés Perea ()
Abstract: We extend the Ståhl-Rubinstein alternating-offer
bargaining procedure to allow players, prior to each bargaining round, to
simultaneously and visibly commit to some share of the pie. If commitment
costs are small but increasing in the committed share, then the unique
outcome consistent with common belief in future rationality (Perea, 2009),
or more restrictively subgame perfect Nash equilibrium, exhibits a second
mover advantage. In particular, as the smallest share of the pie approaches
zero, the horizon approaches in…nity, and commitment costs approach zero,
the unique bargaining outcome corresponds to the reversed Rubinstein
outcome (d/(1 + d); 1/(1 + d)).
Keywords: alternating offer bargaining; bargaining power; commitment; epistemic game theory; patience; (follow links to similar papers)
JEL-Codes: C72; C78; D84; (follow links to similar papers)
12 pages, November 17, 2009
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