Alternating-offer bargaining with the global games information structure

Alternating Offer Bargaining with Endogenous Information*

Two ex ante identically informed agents play an alternating offer bargaining game with endogenous information acquisition and common values. This paper shows that perfect Bayesian equilibria may have the following properties. (i) No agreement exists in ultimatum bargaining although both agents maintain symmetric information in equilibrium and the gain from trade is common knowledge. (ii) The ag...

Alternating-offer games with final-offer arbitration

I analyze an alternating-offer model that integrates the common practice of having an arbitrator determine the outcomes if both players’ offers are rejected. I assume that the arbitrator uses final-offer arbitration (as in professional baseball). I find that if the arbitrator does not excessively favor one player, then the unique subgame-perfect equilibrium always coincides with the subgame-per...

Bounded Rationality and Alternating-Offer Bargaining

One form of bounded rationality is a breakdown in the commonality of the knowledge that the players are rational. In Rubinstein’s two-person alternating-offer bargaining game, assuming time preferences with constant discount factors, common knowledge of rationality is necessary for an agreement on a subgame perfect equilibrium (SPE) partition to be reached (if ever). In this note, assuming time...

Department of Economics Alternating-offer Bargaining with Two-sided Incomplete Information

Asymmetric Inequality Aversion and Noisy Behavior in Alternating-Offer Bargaining Games

In two-stage bargaining games with alternating offers, the amount of the pie that remains after a rejection is what the first player should offer to the second player, since the second player can capture this remainder in the final (ultimatum) stage. Fairness considerations will reduce the correlation between first-stage offers and the size of the remaining pie, but randomness in behavior will ...