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Markov bargaining games

Cripps, M.W.; (1998) Markov bargaining games. Journal of Economic Dynamics and Control , 22 (3) pp. 341-355. 10.1016/S0165-1889(97)00059-6. Green open access

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Abstract

I consider an alternating offer bargaining game which is played by a risk neutral buyer and seller, where the value of the good to be traded follows a Markov process. For these games the existence of a perfect equilibrium is proved and the set of equilibrium payoffs and strategies are characterised. The main results are (a) if the buyer is less patient than the seller, then there will be delays in the players reaching an agreement, the buyer is forced into a suboptimal consumption policy and the equilibrium is ex-ante inefficient, and (b) if the buyer is more patient than the seller, then there is a unique and efficient equilibrium where agreement is immediate.

Type: Article
Title: Markov bargaining games
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/S0165-1889(97)00059-6
Publisher version: http://dx.doi.org/10.1016/S0165-1889(97)00059-6
Language: English
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/16384
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