Bilateral bargaining with endogenous status quo

Tomohiko Kawamori

Economics Letters, 2019, vol. 185, issue C

Abstract: We consider a non-cooperative bargaining game where in each round, if a proposal is rejected, with a probability, the allocation implemented in the previous round is implemented as a status quo and the game proceeds to the next round, and with the complementary probability, no allocations are implemented and the negotiations break down. We show that there exists a unique stationary subgame perfect equilibrium such that in any round, a proposer offers a proposal such that the responder is indifferent between accepting and rejecting it and an agreement is achieved. If the probability of breakdown is close to zero, the sequence of equilibrium allocations evolves from the initial status quo to an allocation near the equilibrium allocation of the Rubinstein bargaining game over time. The effect of the initial status quo on the equilibrium allocations vanishes over time.

Keywords: Bargaining; Endogenous status quo; Breakdown; Relevance to the Rubinstein bargaining game; Vanishing effect of the status quo (search for similar items in EconPapers)
JEL-codes: C73 C78 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165176519303489
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:185:y:2019:i:c:s0165176519303489

DOI: 10.1016/j.econlet.2019.108699

Access Statistics for this article

Economics Letters is currently edited by Economics Letters Editorial Office

More articles in Economics Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().