 Alternating offers bargaining with loss aversionBram Driesen (), Andrés Perea and Hans Peters Mathematical Social Sciences, 2012, vol. 64, issue 2, 103-118 Abstract: The Rubinstein alternating offers bargaining game is reconsidered under the assumption that each player is loss averse and the associated reference point is equal to the highest turned down offer of the opponent in the past. This makes the payoffs and therefore potential equilibrium strategies dependent on the history of play. A subgame perfect equilibrium is constructed, in which the strategies depend on the history of play through the current reference points. It is shown that this equilibrium is unique under some assumptions that it shares with the equilibrium in the classical model: immediate acceptance of equilibrium offers, indifference between acceptance and rejection of such offers, and strategies depending only on the current reference points. It is also shown that in this equilibrium loss aversion is a disadvantage. Moreover, a relation with asymmetric Nash bargaining is established, where a player’s bargaining power is negatively related to own loss aversion and positively to the opponent’s loss aversion. Date: 2012 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:64:y:2012:i:2:p:103-118 DOI: 10.1016/j.mathsocsci.2011.10.010 Access Statistics for this article Mathematical Social Sciences is currently edited by J.-F. Laslier More articles in Mathematical Social Sciences from Elsevier |
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