Extreme equilibria in the negotiation model with different time

H.E.D. Houba, Q. Wen

    Research output: Contribution to JournalArticleAcademicpeer-review

    Abstract

    We study a negotiation model with a disagreement game between offers and counteroffers. When players have different time preferences, delay can be Pareto efficient, thereby violates the presumption of the Hicks Paradox. We show that all equilibria are characterized by the extreme equilibria. Making unacceptable offers supports extreme equilibria, and significantly alters the backward-induction technique to find the extreme equilibrium payoffs. A player's worst equilibrium payoff is characterized by a minmax problem involving efficient equilibrium payoffs that are above the bargaining frontier, which is possible when players have sufficiently different time preferences. © 2011 Elsevier Inc.
    Original languageEnglish
    Pages (from-to)507-516
    JournalGames and Economic Behavior
    Volume73
    DOIs
    Publication statusPublished - 2011

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