Paper #241

Title:

Finite horizon bargaining and the consistent field

Authors:

Armando Gomes, Sergiu Hart and Andreu Mas-Colell

Date:

April 1997

Abstract:

This paper explores the relationships between noncooperative bargaining games and the consistent value for non-transferable utility (NTU) cooperative games. A dynamic approach to the consistent value for NTU games is introduced: the consistent vector field. The main contribution of the paper is to show that the consistent field is intimately related to the concept of subgame perfection for finite horizon noncooperative bargaining games, as the horizon goes to infinity and the cost of delay goes to zero. The solutions of the dynamic system associated to the consistent field characterize the subgame perfect equilibrium payoffs of the noncooperative bargaining games. We show that for transferable utility, hyperplane and pure bargaining games, the dynamics of the consistent fields converge globally to the unique consistent value. However, in the general NTU case, the dynamics of the consistent field can be complex. An example is constructed where the consistent field has cyclic solutions; moreover, the finite horizon subgame perfect equilibria do not approach the consistent value.

Keywords:

Noncooperative bargaining games, consistent value, consistent

JEL codes:

C71, C72

Area of Research:

Microeconomics

Published in:

Games and Economic Behavior, Vol. 27, pp. 204-228, 1999

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