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Strategic bargaining in the variable threat game

Author

Listed:
  • Harold Houba

    (Department of Econometrics, Vrije Universiteit, De Boelelaan 1105, NL-1081 HV Amsterdam, THE NETHERLANDS)

  • Wilko Bolt

    (Econometrics and Special Studies Department, De Nederlandsche Bank, P.O. Box 98, NL-1000 AB Amsterdam, THE NETHERLANDS)

Abstract

In this paper the alternating offer model with an exogenous risk of breakdown is taken to explicitly model the bargaining process underlying the variable threat game (Nash, Econometrica, 1953). A modified version of the variable threat game without commitment is also analysed within a dynamic context. The limit set of subgame perfect equilibria is characterized in both dynamic versions. The analysis gives rise to different results than in the two standard models. By making additional assumptions the original results can be regained, indicating that these are implicitly present in the standard analysis.

Suggested Citation

  • Harold Houba & Wilko Bolt, 1997. "Strategic bargaining in the variable threat game," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(1), pages 57-77.
    • Handle: RePEc:spr:joecth:v:11:y:1997:i:1:p:57-77
    Note: Received: August 29, 1995; revised version: November 11, 1996
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    Cited by:

    1. Bester, Helmut & Sakovics, Jozsef, 2001. "Delegated bargaining and renegotiation," Journal of Economic Behavior & Organization, Elsevier, vol. 45(4), pages 459-473, August.
    2. Juan J. Vidal-Puga, 2004. "Bargaining with commitments," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(1), pages 129-144, January.
    3. Segendorff, Björn, 2001. "Patience and Ultimatum in Bargaining," SSE/EFI Working Paper Series in Economics and Finance 461, Stockholm School of Economics.

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