Time Preferences and Bargaining

Sebastian Schweighofer-Kodritsch
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Sebastian Schweighofer-Kodritsch: Humboldt University Berlin and WZB Berlin

No 38, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: This paper presents an analysis of general time preferences in the canonical Rubinstein (1982) model of bargaining, allowing for arbitrarily history-dependent strategies. I derive a simple sufficient structure for optimal punishments and thereby fully characterize (i) the set of equilibrium outcomes for any given preference profile, and (ii) the set of preference profiles for which equilibrium is unique. Based on this characterization, I establish that a weak notion of present bias - implied, e.g., by any hyperbolic or quasi-hyperbolic discounting - is sufficient for equilibrium to be unique, stationary and efficient. Conversely, I demonstrate how certain violations of present bias give rise to multiple (non-stationary) equilibria that feature delayed agreement under gradually increasing offers.

Keywords: time preferences; dynamic inconsistency; alternating offers; bargaining; optimal punishments; delay (search for similar items in EconPapers)
JEL-codes: C78 D03 D74 (search for similar items in EconPapers)
Date: 2017-06-18
New Economics Papers: this item is included in nep-gth and nep-mic
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Citations: View citations in EconPapers (1)

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