Bargaining with Absentmindedness

Cole Wittbrodt

Papers from arXiv.org

Abstract: Delay is the norm in bargaining. I propose a novel source of bargaining delay: absentmindedness. Instead of interpreting absentmindedness as a literal memory friction, I use absentmindedness to represent a broader form of bounded rationality in dynamic games where players cannot perfectly track a game's progression. Bargainers unable to finely condition play on the stage of dynamic interaction can credibly refuse last-minute ultimatums. Other parties that anticipate this behavior are driven to offer preemptive concessions to avoid a breakdown in negotiations. Absentmindedness is thus a source of bargaining power, even for players who never make offers. This bargaining power comes at the cost of efficiency; I show that there can be equilibria where offers are rejected on the path of play.

Date: 2025-09, Revised 2026-03
New Economics Papers: this item is included in nep-gth and nep-mic
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