History-dependent Reciprocity in Alternating Offer Bargaining

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.