Reinterpreting the meaning of breakdown
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Autores: Juan José Vidal Puga
- Localización: Working paper series ( RGEA ), Nº. 3, 2007
- Idioma: inglés
- Enlaces
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Resumen
Alternating bargaining has been extensively used to model twosided negotiations. The celebrated model of Rubinstein (1982) has provided a formal justification for equitable payoff division. A typical assumption of these models under risk is that the breakdown event means a complete and irrevocable halt in negotiations. In this paper, the meaning of breakdown is reinterpreted as the imposition to finish negotiations immediately. Specifically, after breakdown the last offer becomes definitive. While Rubinstein¿s model predicts an immediate agreement with stationary strategies, we show that the same payoff allocation is attainable under non-stationary strategies. Moreover, the payoffs in delayed equilibria are potentially better for the proposer than those in which agreement is immediately reached.
