Complexity and Efficiency in Repeated Games with Negotiation

Hamid Sabourian and Jihong Lee

No 58, Econometric Society 2004 North American Summer Meetings from Econometric Society

Abstract: This paper considers the "negotiation game" (Busch and Wen, 1995) which combines the features of two-person alternating offers bargaining and repeated games. Despite the forces of bargaining, the negotiation game in general admits a large number of equilibria some of which involve delay in agreement and inefficiency. In order to isolate equilibria in this game, we explicitly consider the complexity of implementing a strategy, introduced in the literature on repeated games played by automata. It turns out that when the players have a preference for less complex strategies (even at the margin) only efficient equilibria survive. Thus, complexity and bargaining in tandem may offer an explanation for co-operation in repeated games

Keywords: Negotiation Game; Repeated Game; Bargaining; Complexity; Bounded Rationality; Automaton (search for similar items in EconPapers)
JEL-codes: C72 C78 (search for similar items in EconPapers)
Date: 2004-08-11
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Working Paper: Complexity and Efficiency in Repeated Games with Negotiation (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:ecm:nasm04:58

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