Bargining and Investment

Francesca Flamini

Working Papers from Business School - Economics, University of Glasgow

Abstract: The focus of this paper is on repeated bargaining games in which two parties can decide how much to invest and how to share the remaining surplus for their own consumption. The game is dynamic since the current level of investment affects future surpluses. We characterise an MPE without delays in general terms and show the parametrical effects for the specific case in which parties share the surplus equally. We show that the relatively more patient player invests more than his opponent, for a given capital stock. Moreover, if the probability of becoming a proposer decreases for the more patient player, then such a player reduces his investment, while the relatively impatient player increases his investment.

JEL-codes: C61 C72 C73 C78 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec
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Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2005_6

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