Extreme equilibria in the negotiation model with different time preferences

Harold Houba and Quan Wen ()

Games and Economic Behavior, 2011, vol. 73, issue 2, 507-516

Abstract: We study a negotiation model with a disagreement game between offers and counteroffers. When players have different time preferences, delay can be Pareto efficient, thereby violates the presumption of the Hicks Paradox. We show that all equilibria are characterized by the extreme equilibria. Making unacceptable offers supports extreme equilibria, and significantly alters the backward-induction technique to find the extreme equilibrium payoffs. A playerʼs worst equilibrium payoff is characterized by a minmax problem involving efficient equilibrium payoffs that are above the bargaining frontier, which is possible when players have sufficiently different time preferences.

Keywords: Bargaining; Negotiation; Time preference; Endogenous threats; Hicks Paradox (search for similar items in EconPapers)
JEL-codes: C72 C73 C78 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:73:y:2011:i:2:p:507-516

DOI: 10.1016/j.geb.2011.04.004

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