Scandinavian Working Papers in Economics

Working Papers,
Lund University, Department of Economics

No 2005:38: Evolutionary Stability in Bargaining with an Asymmetric Breakdown Point

Pär Torstensson
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Pär Torstensson: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden

Abstract: We study an asymmetric two-player bargaining game with risk of breakdown and no discounting. We characterize the modified evolutionarily stable strategies (MESS) by modelling strategies as automata. Payoff and complexity considerations are taken in the automata-selection process. We show that a MESS exists in the bargaining game and that agreement is reached immediately. It turns out that in the search for evolutionary foundation, we find support for all partitions that assigns the positive breakdown utility x or more to the player with the higher breakdown utility, given that it exceeds half the surplus.

Keywords: Modified evolutionary stable strategies; bargaining; automata; asymmetric breakdown point.

JEL-codes: C72; C73; C78

34 pages, June 15, 2005

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