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Non-cooperative Bargaining for Side Payments Contract

Akira Okada ()
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Akira Okada: Kyoto University

No 983, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: We present a non-cooperative sequential bargaining game for side payments contracting. Players voluntarily participate in negotiations. If any player does not participate, then renegotiation will take place in the next round, given an on-going contract. We show that if the stop- ping probability of negotiations is sufficiently small, then there exists an efficient Markov perfect equilibrium where all players immediately par- ticipate in negotiations and agree to the Nash bargaining solution. The efficiency result is strengthened by the asymptotically efficient one that in every Markov perfect equilibrium, all players participate in negotia- tions through a process of renegotiations in the long run with probability one. Finally, we illustrate international negotiations for climate change as an application of the result.

Keywords: Coase theorem; contract; efficiency; externality; Nash bar- gaining solution; non-cooperative bargaining; side payments (search for similar items in EconPapers)
JEL-codes: C71 C72 C78 (search for similar items in EconPapers)
Pages: 50pages
Date: 2018-01
New Economics Papers: this item is included in nep-agr, nep-cdm, nep-cta, nep-env, nep-gth, nep-mic and nep-ore
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