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Evolutionary Stability in Alternating-Offers Bargaining Games

Author

Listed:
  • Ken Binmore
  • Michele Piccione
  • Larry Samuelson
Abstract
This paper characterizes modified evolutionarily stable strategies (messes) in Rubinstein's alternating-offers, infinite-horizon bargaining game. The mess concept modifies the idea of a neutrally stable strategy by favoring a simple strategy over a more complex strategy when both yield the same payoff. We show that if strategy A is a mess, then the use of A by both players is a Nash equilibriumin which an agreement is achieved immediately, and neither player would be willing to delay the agreement by one period in order to achieve the other player's share of the surplus. Each player's share of the surplus is then bounded between the shares received by the two players in the unique subgame-perfect equilibrium of Rubinstein's game. As the probability of a breakdown in negotiations becomes small (or discount factors become large), these bounds collapse on the subgame-perfect equilibrium. These results continue to hold when offers must be made in multiples of a smallest monetary unit.

Suggested Citation

  • Ken Binmore & Michele Piccione & Larry Samuelson, "undated". "Evolutionary Stability in Alternating-Offers Bargaining Games," ELSE working papers 041, ESRC Centre on Economics Learning and Social Evolution.
    • Handle: RePEc:els:esrcls:041
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    Citations

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    Cited by:

    1. Luhan, Wolfgang J. & Poulsen, Anders U. & Roos, Michael W.M., 2017. "Real-time tacit bargaining, payoff focality, and coordination complexity: Experimental evidence," Games and Economic Behavior, Elsevier, vol. 102(C), pages 687-699.
    2. Torstensson, Pär, 2005. "Evolutionary Stability in Bargaining with an Asymmetric Breakdown Point," Working Papers 2005:38, Lund University, Department of Economics.
    3. Lee, J. & Sabourian, H., 2004. "Complexity and Efficiency in Repeated Games and Negotiation," Cambridge Working Papers in Economics 0419, Faculty of Economics, University of Cambridge.
    4. D.D.B. Bragt, van & J. A. La Poutr & E. H. Gerding, 2000. "Equilibrium Selection In Evolutionary Bargaining Models," Computing in Economics and Finance 2000 323, Society for Computational Economics.
    5. Konrad, Kai A. & Morath, Florian, 2016. "Bargaining with incomplete information: Evolutionary stability in finite populations," Journal of Mathematical Economics, Elsevier, vol. 65(C), pages 118-131.
    6. Hamid Sabourian & Jihong Lee, 2004. "Complexity and Efficiency in the Negotiation Game," Econometric Society 2004 North American Winter Meetings 82, Econometric Society.
    7. Lee, Jihong & Sabourian, Hamid, 2007. "Coase theorem, complexity and transaction costs," Journal of Economic Theory, Elsevier, vol. 135(1), pages 214-235, July.
    8. Hamid Sabourian, 2000. "Bargaining and Markets: Complexity and the Walrasian Outcome," Cowles Foundation Discussion Papers 1249, Cowles Foundation for Research in Economics, Yale University.
    9. Ellingsen, Tore & Robles, Jack, 2002. "Does Evolution Solve the Hold-Up Problem?," Games and Economic Behavior, Elsevier, vol. 39(1), pages 28-53, April.
    10. D.D.B. van Bragt & J.A. La Poutré, 2003. "Why Agents for Automated Negotiations Should Be Adaptive," Netnomics, Springer, vol. 5(2), pages 101-118, November.
    11. Lee, Jihong & Sabourian, Hamid, 2015. "Complexity and repeated implementation," Journal of Economic Theory, Elsevier, vol. 158(PA), pages 259-292.
    12. Sabourian, Hamid, 2004. "Bargaining and markets: complexity and the competitive outcome," Journal of Economic Theory, Elsevier, vol. 116(2), pages 189-228, June.
    13. Jean-Pierre P. Langlois & Catherine C. Langlois, 2004. "Holding Out for Concession: The Quest for Gain in the Negotiation of International Agreements," International Interactions, Taylor & Francis Journals, vol. 32(3), pages 261-293, April.
    14. Hamid Sabourian & Jihong Lee, 2004. "Complexity and Efficiency in Repeated Games with Negotiation," Econometric Society 2004 Far Eastern Meetings 401, Econometric Society.
    15. Samuelson, Larry, 2001. "Analogies, Adaptation, and Anomalies," Journal of Economic Theory, Elsevier, vol. 97(2), pages 320-366, April.
    16. Kopp, Andreas, 1997. "Adaptive behavior, choice of residential location and localization of labor markets," Kiel Working Papers 795, Kiel Institute for the World Economy (IfW Kiel).
    17. Heinrich Nax, 2015. "Equity dynamics in bargaining without information exchange," Journal of Evolutionary Economics, Springer, vol. 25(5), pages 1011-1026, November.
    18. Ellingsen, Tore & Miettinen, Topi, 2014. "Tough negotiations: Bilateral bargaining with durable commitments," Games and Economic Behavior, Elsevier, vol. 87(C), pages 353-366.

    More about this item

    Keywords

    Bargaining; Alternating offers; Subgame perfection; Evolution-ary stability;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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