A Tale of Two Bargaining Solutions

Games

Emin Karagözoğlu¹  Kerim Keskin² 

[1]Department of Economics, Bilkent University, 06800 Çankaya-Ankara, Turkey

[2] E-Mail

关键词: aspiration points;    bargaining problem;    endogenous disagreement points;    reference points;   

DOI  :  10.3390/g6020161

来源: mdpi

【 摘 要 】

We set up a rich bilateral bargaining model with four salient points (disagreement point, ideal point, reference point, and tempered aspirations point), where the disagreement point and the utility possibilities frontier are endogenously determined. This model allows us to compare two bargaining solutions that use reference points, the Gupta-Livne solution and the tempered aspirations solution, in terms of Pareto efficiency in a strategic framework. Our main result shows that the weights solutions place on the disagreement point do not directly imply a unique efficiency ranking in this bargaining problem with a reference point. In particular, the introduction of a reference point brings one more degree of freedom to the model which requires also the difference in the weights placed on the reference point to be considered in reaching an efficiency ranking.

【 授权许可】

CC BY   
© 2015 by the authors; licensee MDPI, Basel, Switzerland.