Imperfect Information Processing in Sequential Bargaining Games with Present Biased Preferences

27 Pages Posted: 21 Aug 2008

See all articles by Zafer Akin

Zafer Akin

TOBB University of Economics and Technology

Date Written: August 15, 2008

Abstract

This paper studies an alternating-offers bargaining game between a time-consistent and a time-inconsistent player who processes information on own preference type imperfectly that flows during the course of the game. The time-inconsistency is modeled by quasi-hyperbolic discounting and the "naive backwards induction" is used as the solution concept. By using cognitive and mood state approaches, we model learning of naive time-inconsistent player. The main result specifies a clear connection between the model parameters and the equilibrium in the most general sense. For special cases, critical delay times and probabilistic structure of the agreement and relations between them are characterized. Comparative statics imply that more naive players and players with milder self control problems are offered higher shares more frequently.

Keywords: Quasi-hyperbolic discounting, imperfect information processing, sequential bargaining

JEL Classification: C78, D83

Suggested Citation

Akin, Zafer, Imperfect Information Processing in Sequential Bargaining Games with Present Biased Preferences (August 15, 2008). Available at SSRN: https://ssrn.com/abstract=1228527 or http://dx.doi.org/10.2139/ssrn.1228527

Zafer Akin (Contact Author)

TOBB University of Economics and Technology ( email )

Faculty of Economics and Administrative Sciences
Söğütözü Cad. 43,
Ankara, Cankaya
Turkey
+903122924216 (Phone)

HOME PAGE: http://www.etu.edu.tr/~zafer.akin/

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