On the Nash bargaining solution with noise

W. Gueth, Klaus Ritzberger and E. van Damme
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E. van Damme: Tilburg University, Center for Economic Research
Authors registered in the RePEc Author Service: Werner Güth ()

No 79, Discussion Paper from Tilburg University, Center for Economic Research

Abstract: Suppose two parties have to share a surplus of random size. Each of the two can either commit to a demand prior to the realization of the surplus - as in the Nash demand game with noise - or remain silent and wait until the surplus was publicly observed. Adding the strategy to wait to the noisy Nash demand game results in two strict equilibria, in each of which one player takes almost the whole surplus, provided uncertainty is small. If commitments concern only who makes the first offer, the more balanced Nash bargaining solution is approximately restored. In all cases commitment occurs in equilibrium, even though this entails the risk of breakdown of negotiations.

JEL-codes: C72 C78 (search for similar items in EconPapers)
Date: 2002
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Journal Article: On the Nash bargaining solution with noise (2004)
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