On non-cooperative foundation and implementation of the Nash Solution in subgame perfect equilibrium via Rubinstein’s game

Papatya Duman and Walter Trockel
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Papatya Duman: Center for Mathematical Economics, Bielefeld University

No 550, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: The alternating offers game due to Rubinstein (1982) had been used by Binmore (1980) and by Binmore et.al. (1986) to provide via its unique subgame perfect equilibrium an approximate non-cooperative support for the Nash bargaining solution of associated cooperative two-person bargaining games. These results had strengthened the prominent role of the Nash bargaining solution in cooperative axiomatic bargaining theory and its application, for instance in labor markets, and have often even be interpreted as a mechanism theoretical implementation of the Nash solution. Our results in the present paper provide exact non-cooperative foundations first, in our Proposition, via weakly subgame perfect equilibria of a game that is a modification of Rubinstein´s game, then in our Theorem, via sub-game perfect equilibria of a game that is a further modification of our first game. Moreover, they provide a general rule how to transform approximate support results into exact ones. Finally, we discuss the relation of the above mentioned support results, including our present ones, with mechanism theoretic implementation in (weakly) subgame perfect equilibrium of the Nash solution. There we come to the conclusion that a sound interpretation as an implementation can hardly be found except in very rare cases of extremely restricted domains of players´ preferences.

Keywords: Nash program; Non-cooperative foundation; Implementation; Nash solution; Rubinstein game; Subgame perfect equilibrium (search for similar items in EconPapers)
Pages: 17
Date: 2016-01-15
New Economics Papers: this item is included in nep-gth, nep-hpe and nep-mic
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Citations: View citations in EconPapers (9)

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