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Extreme equilibria in the negotiation model with different time preferences

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  • Houba, Harold
  • Wen, Quan

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 playerʼs 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.

Suggested Citation

  • Houba, Harold & Wen, Quan, 2011. "Extreme equilibria in the negotiation model with different time preferences," Games and Economic Behavior, Elsevier, vol. 73(2), pages 507-516.
    • Handle: RePEc:eee:gamebe:v:73:y:2011:i:2:p:507-516
    DOI: 10.1016/j.geb.2011.04.004
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    Cited by:

    1. Carmona, Guilherme & Carvalho, Luís, 2016. "Repeated two-person zero-sum games with unequal discounting and private monitoring," Journal of Mathematical Economics, Elsevier, vol. 63(C), pages 131-138.
    2. Ana Mauleon & Vincent Vannetelbosch, 2013. "Relative Concerns and Delays in Bargaining with Private Information," Games, MDPI, vol. 4(3), pages 1-10, June.
    3. Daniel Cardona & Antoni Rubí-Barceló, 2016. "Time-Preference Heterogeneity and Multiplicity of Equilibria in Two-Group Bargaining," Games, MDPI, vol. 7(2), pages 1-17, May.
    4. Kimmo Berg, 2017. "Extremal Pure Strategies and Monotonicity in Repeated Games," Computational Economics, Springer;Society for Computational Economics, vol. 49(3), pages 387-404, March.
    5. Houba, Harold & Wen, Quan, 2014. "Backward induction and unacceptable offers," Journal of Mathematical Economics, Elsevier, vol. 54(C), pages 151-156.
    6. Houba, Harold & Li, Duozhe & Wen, Quan, 2022. "Bargaining with costly competition for the right to propose," Journal of Mathematical Economics, Elsevier, vol. 98(C).
    7. Ren Tan & Kairong Hong, 2021. "Research on Extreme Dispute Decisions of Large-Scale Engineering Projects from the Perspective of Multidimensional Preferences," Mathematics, MDPI, vol. 9(22), pages 1-24, November.

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    More about this item

    Keywords

    Bargaining; Negotiation; Time preference; Endogenous threats; Hicks Paradox;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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