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Bargaining in a non-stationary environment

Coles, MG and Muthoo, A (2003) 'Bargaining in a non-stationary environment.' Journal of Economic Theory, 109 (1). 70 - 89. ISSN 0022-0531

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Abstract

We study an alternating offers bargaining model in which the set of possible utility pairs evolves through time in a non-stationary, but smooth manner. In general, there exists a multiplicity of subgame perfect equilibria. However, we show that in the limit as the time interval between two consecutive offers becomes arbitrarily small, there exists a unique subgame perfect equilibrium. Furthermore, we derive a powerful characterization of the unique (limiting) subgame perfect equilibrium payoffs. We then explore the circumstances under which Nash's bargaining solution implements this bargaining equilibrium. Finally, we extend our results to the case when the players have time-varying inside options. © 2003 Elsevier Science (USA). All rights reserved.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 04 Jan 2013 12:57
Last Modified: 17 Aug 2017 18:04
URI: http://repository.essex.ac.uk/id/eprint/4897

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