Subgame perfect equilibrium in a bargaining model with deterministic procedures

Liang Mao ()

Theory and Decision, 2017, vol. 82, issue 4, No 2, 485-500

Abstract: Abstract Two players, A and B, bargain to divide a perfectly divisible pie. In a bargaining model with constant discount factors, $$\delta _A$$ δ A and $$\delta _B$$ δ B , we extend Rubinstein (Econometrica 50:97–110, 1982)’s alternating offers procedure to more general deterministic procedures, so that any player in any period can be the proposer. We show that each bargaining game with a deterministic procedure has a unique subgame perfect equilibrium (SPE) payoff outcome, which is efficient. Conversely, each efficient division of the pie can be supported as an SPE outcome by some procedure if $$\delta _A+\delta _B\ge 1$$ δ A + δ B ≥ 1 , while almost no division can ever be supported in SPE if $$\delta _A+\delta _B

Keywords: Noncooperative bargaining; Subgame perfect equilibrium; Bargaining procedure (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11238-016-9577-5

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