A Fictitious-Play Model of Bargaining To Implement the Nash Solution

Younghwan In
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Younghwan In: National University of Singapore

Departmental Working Papers from National University of Singapore, Department of Economics

Abstract: We present a fictitious-play model of bargaining, where two bargainers play the Nash demand game repeatedly. The bargainers make a deliberate decision on their demands in the initial period and then follow a fictitious play process subsequently. If the bargainers are patient, the set of epsilon -equilibria of the initial-demand game is in a neighborhood of the division corresponding to the Nash bargaining solution. As the bargainers make a more accurate comparison of payoffs and become more patient accordingly, the set of epsilon-equilibria shrinks and the only equilibrium left is the division of the Nash bargaining solution.

Keywords: fictitious play; Nash demand game; epsilon-equilibrium; Nash bargaining solution; Nash program. (search for similar items in EconPapers)
JEL-codes: C71 C72 C78 D83 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
Date: 2005-01
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