Optimally Stubborn

Anna Sanktjohanser ()
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Anna Sanktjohanser: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, Yale University [New Haven]

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Abstract: Models on reputational bargaining have introduced a perturbation with simple be-havioral types as a way of refining payo˙ predictions for the rational type. I show that this outcome refinement is not robust to the specification of the behavioral type. More specifically, I consider a slight relaxation of the strategy restriction on behavioral types relative to the literature, allowing behavioral types to choose their initial demands. I show that with this relaxation any feasible payo˙ can be achieved in equilibrium for the rational type when the probability of facing a behavioral type is small. My results highlight the implications of di˙erent perturbations for economic applications.

Date: 2022-09-16
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