Alternating bid bargaining with a smallest money unit

Van Damme, E. and Selten, R. and Winter, E. (1990) Alternating bid bargaining with a smallest money unit. Games and Economic Behavior, 2 (2). pp. 188-201. ISSN 0899-8256

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In a seminal paper, Ariel Rubinstein has shown that impatience implies determinateness of the two-person bargaining problem. In this note we show that this result depends also on the assumption that the set of alternatives is a continuum. If the pie can be divided only in finitely many different ways (for example, because the pie is an amount of money and there is a smallest money unit), any partition can be obtained as the result of a subgame perfect equilibrium if the time interval between successive offers is sufficiently small. We also show that, for a fixed discount rate, all subgame perfect equilibrium payoffs of the discrete game converge to the solution obtained by Rubinstein if the smallest money unit tends to zero. © 1990.

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Games and Economic Behavior
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14 Aug 2018 10:18
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17 Sep 2023 02:20