A Behavioral Model of Bargaining with Endogenous Types

Dilip Abreu () and David Pearce
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Dilip Abreu: Princeton University
David Pearce: Cowles Foundation, Yale University, https://cowles.yale.edu/

No 1446, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: We enrich a simple two-person bargaining model by introducing "behavioral types" who concede more slowly than does the average person in the economy. The presence of behavioral types profoundly influences the choices of optimizing types. In equilibrium, concessions are calculated to induce "reciprocity": a substantial concession by player i is followed by a period in which j is much more likely to make a concession than usual. This favors concessions by i that are neither very small nor large enough to end the bargaining immediately. A key difference from the traditional method of perturbing a game is that the actions of our behavioral types are not specified in absolute terms, but relative to the norm in the population. Thus their behavior is determined endogenously as part of a social equilibrium.

Keywords: Bargaining; Reputation; Endogenous type (search for similar items in EconPapers)
JEL-codes: C7 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2003-11
New Economics Papers: this item is included in nep-cbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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