Complexity and Efficiency in the Negotiation Game

Hamid Sabourian and Jihong Lee

No 82, Econometric Society 2004 North American Winter Meetings from Econometric Society

Abstract: This paper considers the ``negotiation game'' Busch and Wen (1995)) which combines the features of two-person alternating offers bargaining and repeated games. Despite the forces of bargaining, the negotiation game in general admits a large number of equilibria some of which involve delay and inefficiency. In order to isolate equilibria in this game, we investigate the role of complexity of implementing a strategy, introduced in the literature on repeated games played by automata. It turns out that when the players care for less complex strategies (at the margin) only efficient equilibria survive. Thus, complexity and bargaining in tandem may offer an explanation for co-operation and efficiency in repeated games

Keywords: Bargaining; Repeated Game; Negotiation Game; Complexity; Automaton (search for similar items in EconPapers)
JEL-codes: C72 C78 (search for similar items in EconPapers)
Date: 2004-08-11
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:nawm04:82

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