Reinterpreting the meaning of breakdown

Juan Vidal-Puga

Game Theory and Information from EconWPA

Abstract: A typical assumption of the standard alternating-offers model under risk is that the breakdown event means a complete and irrevocable halt in negotiations. We reinterpret the meaning of breakdown as the imposition to finish negotiations immediately. Specifically, after breakdown the last offer becomes definitive. A full characterization of the set of subgame perfect equilibrium payoffs is provided. We show that Rubinstein's allocation (1/(1+?),?/(1+?)) is obtained under non- stationary strategies. Moreover, the payoffs in delayed equilibria are potentially better for the proposer than those in which agreement is immediately reached.

Keywords: breakdown; bargaining (search for similar items in EconPapers)
JEL-codes: C72 C78 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
Date: 2005-01-31
Note: Type of Document - pdf; pages: 30
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http://129.3.20.41/eps/game/papers/0501/0501004.pdf (application/pdf)

Related works:
Working Paper: REINTERPRETING THE MEANING OF BREAKDOWN (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpga:0501004

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