Stochastic Orders of Proposing Players in Bargaining

Tinbergen Institute Discussion Paper No. TI 05-063/1

28 Pages Posted: 23 Jun 2005

See all articles by Harold Houba

Harold Houba

VU University Amsterdam, Department of Econometrics; VU University Amsterdam, Tinbergen Institute

Date Written: June 2005

Abstract

The bargaining model with stochastic order of proposing players is properly embedded in continuous time and it is strategically equivalent to the alternating offers model. For all parameter values, the pair of equilibrium proposals corresponds to the Nash bargaining solution of a modified bargaining problem and the Maximum Theorem implies convergence to the Nash bargaining solution when time between proposals vanishes. The model unifies alternating offers, one-sided offers and random proposers. Only continuous-time Markov processes are firmly rooted in probability theory and offer fundamentally different limit results.

Keywords: Bargaining, negotiation, alternating offers, Markov process, subgame perfect equilibrium, Nash bargaining solution, maximum theorem

JEL Classification: C72, C73, C78

Suggested Citation

Houba, Harold E. D. and Houba, Harold E. D., Stochastic Orders of Proposing Players in Bargaining (June 2005). Tinbergen Institute Discussion Paper No. TI 05-063/1, Available at SSRN: https://ssrn.com/abstract=745184 or http://dx.doi.org/10.2139/ssrn.745184

Harold E. D. Houba (Contact Author)

VU University Amsterdam, Tinbergen Institute ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

HOME PAGE: http://personal.vu.nl/h.e.d.houba/

VU University Amsterdam, Department of Econometrics ( email )

De Boelelaan 1105
Amsterdam, 1081 HV
Netherlands

HOME PAGE: http://personal.vu.nl/h.e.d.houba/

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