A Simple Bargaining Model where Parties Make Errors

Van Essen, Matthew (2014): A Simple Bargaining Model where Parties Make Errors.

Abstract

In this paper, we develop a bargaining model where parties (or their intermediaries) make errors when reporting their bid. We characterize the Nash equilibria of the game and show that there is a unique equilibrium where trade takes place. This trade equilibrium is shown to converge to the Nash Bargaining Solution of the problem as trembles diminish. Finally, we discuss our results in the context of the previous literature providing a critique of the model and analysis found in Carlsson (1991).

• Item Type: MPRA Paper
• Language: English
• Keywords: Nash Program, Nash Bargaining Solution, Equilibrium Selection, Nash Demand Game
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C71 - Cooperative Games; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory

References

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