Optimism, delay and (in)efficiency in a stochastic model of bargaining

Juan Ortner

Games and Economic Behavior, 2013, vol. 77, issue 1, 352-366

Abstract: I study a bilateral bargaining game in which the size of the surplus follows a stochastic process and in which players might be optimistic about their bargaining power. Following Yildiz (2003), I model optimism by assuming that players have different beliefs about the recognition process. I show that the unique subgame perfect equilibrium of this game might involve inefficient delays. I also show that these inefficiencies disappear when players can make offers arbitrarily frequently.

Keywords: Bargaining; Optimism; Stochastic games; Dynamic games (search for similar items in EconPapers)
JEL-codes: C73 C78 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:77:y:2013:i:1:p:352-366

DOI: 10.1016/j.geb.2012.10.015

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