History-dependent Reciprocity in Alternating Offer Bargaining

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Abstract

This paper studies alternating-offer bargaining with players who have history-dependent reciprocity preferences. To allow for reciprocal motivation, 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.
Original languageEnglish
Peer-reviewed scientific journalFinnish Economic Papers
Volume23
Issue number1
Pages (from-to)1-15
Number of pages15
ISSN0784-5197
Publication statusPublished - 2010
MoE publication typeA1 Journal article - refereed

Keywords

  • 511 Economics

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