Bargaining with Incomplete Information: Evolutionary Stability in Finite Populations

Kai Konrad and Florian Morath

Working Papers from Max Planck Institute for Tax Law and Public Finance

Abstract: This paper considers evolutionarily stable strategies (ESS) in a take-it-or-leave-it offer bargaining game with incomplete information. We find responders reject offers which yield a higher positive material payoff than their outside option. Proposers, in turn, make more attractive offers than in the perfect Bayesian equilibrium. Efficiency-enhancing trade may break down even when the responder has no private information. Overall, the probability of trade and ex post efficiency is lower in the ESS equilibrium than in the corresponding perfect Bayesian equilibrium. The results are observationally equivalent to behavioral explanations such as in-group favoritism and a preference for punishing selfish proposers but are driven by concerns about relative material payoff infinite populations.

Keywords: Evolutionary stability; Finite population; Take-it-or-leave-it offer bargaining; Asymmetric information (search for similar items in EconPapers)
JEL-codes: C73 C78 D82 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2014-09
New Economics Papers: this item is included in nep-evo and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Bargaining with incomplete information: Evolutionary stability in finite populations (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:mpi:wpaper:tax-mpg-rps-2014-16

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