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Non-Cooperative Bargaining with Unsophisticated Agents

Author

Listed:
  • Kristal K. Trejo

    (Center for Research and Advanced Studies)

  • Ruben Juarez

    (University of Hawaii)

  • Julio B. Clempner

    (Instituto Politécnico Nacional)

  • Alexander S. Poznyak

    (Center for Research and Advanced Studies)

Abstract

A traditional non-cooperative bargaining situation involves two or more forward-looking players making offers and counteroffers alternately until an agreement is reached, with a penalty according to the time taken by players in the decision-making process. We introduce a game that aids myopic players to reach the equilibrium as if they were forward-looking agents. The key elements of the game are that players are penalized both for their deviation from the previous best-reply strategy and their time taken for the decision-making at each step of the game. It is shown that our game has an equilibrium not only for the traditional processes and utilities used in traditional non-cooperative bargaining literature, but for an expanded and very comprehensive set of stochastic processes (such as Markov processes) and utility functions. Our work not only complements traditional non-cooperative bargaining literature for myopic agents, but also enlarges the class of processes and functions where Rubinstein’s non-cooperative bargaining solutions might be defined and applied.

Suggested Citation

  • Kristal K. Trejo & Ruben Juarez & Julio B. Clempner & Alexander S. Poznyak, 2023. "Non-Cooperative Bargaining with Unsophisticated Agents," Computational Economics, Springer;Society for Computational Economics, vol. 61(3), pages 937-974, March.
    • Handle: RePEc:kap:compec:v:61:y:2023:i:3:d:10.1007_s10614-020-10003-7
    DOI: 10.1007/s10614-020-10003-7
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    References listed on IDEAS

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