On the Evolutionary stability of "tough" Bargaining Behavior

This paper investigates whether ’tough’ bargaining behavior, which gives rise to inefficiency, can be evolutionary stable. We show that in a two-stage Nash Demand Game tough behavior survives. Indeed, almost all the surplus may be wasted. These results differ drastically from those of Ellingsen’s model (Ellingsen (1997)), where bargaining is efficient. We also study the Ultimatum Game. Here evolutionary selection wipes out all tough behavior, as long as the Proposer does not directly observe the Responder’s commitment to rejecting low offers.