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History-dependent Reciprocity in Alternating Offer Bargaining

Author

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  • Topi Miettinen

    (Aalto University, School of Economics)

Abstract

This paper studies alternating-offer bargaining with players who have history-dependent reciprocity preferences. To allow for reciprocal motiva¬tion, the existing history-dependent models are modified by reversing the way aspirations depend on previous offers. The model exhibits a unique equilibrium where an agreement is reached immediately. As the players' discount factors approach unity, players share the pie according to the golden division: the responder's share of the whole pie coincides with the ratio of the proposer's and the responder's shares. Thus, there is a first-mover disadvantage.

Suggested Citation

  • Topi Miettinen, 2010. "History-dependent Reciprocity in Alternating Offer Bargaining," Finnish Economic Papers, Finnish Economic Association, vol. 23(1), pages 1-15, Spring.
    • Handle: RePEc:fep:journl:v:23:y:2010:i:1:p:1-15
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    File URL: http://www.taloustieteellinenyhdistys.fi/images/stories/fep/fep12010/fep12010miettinen.pdf
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    References listed on IDEAS

    as
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    3. Smith,Vernon L., 2009. "Rationality in Economics," Cambridge Books, Cambridge University Press, number 9780521133388.
    4. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    5. Ran Spiegler, 2002. "Equilibrium in Justifiable Strategies: A Model of Reason-based Choice in Extensive-form Games," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 69(3), pages 691-706.
    6. Fershtman Chaim & Seidmann Daniel J., 1993. "Deadline Effects and Inefficient Delay in Bargaining with Endogenous Commitment," Journal of Economic Theory, Elsevier, vol. 60(2), pages 306-321, August.
    7. Li, Duozhe, 2007. "Bargaining with history-dependent preferences," Journal of Economic Theory, Elsevier, vol. 136(1), pages 695-708, September.
    8. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, vol. 83(5), pages 1281-1302, December.
    9. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
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    Cited by:

    1. Kohler, Stefan, 2012. "Envy can promote more equal division in alternating-offer bargaining," MPRA Paper 40761, University Library of Munich, Germany.
    2. Miettinen, Topi & Perea, Andrés, 2015. "Commitment in alternating offers bargaining," Mathematical Social Sciences, Elsevier, vol. 76(C), pages 12-18.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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