Outside Options in a Bargaining Model with Decay in the Size of the Cake (Now published in Economics Letters 40 (1992), pp.417-421.)
The paper analyses a simple Rubinstein-type bargaining model in which there is no discounting and the cake decays over time at a positive rate. As a consequence, outside options enter players' unique Perfect Equilibrium payoffs. It is then shown that these payoffs, when the interval between two subsequent calls shrinks to zero, take the "split-the-difference" form. (These results generalise easily to the case of three-party bargaining). This can justify the common practice, in labour economics, of deriving wage-equation expressions from Nash-maximands in which the status-quo points are shifted to the outside option level.
Year of publication: |
1992-05
|
---|---|
Authors: | Dalmazzo, Alberto |
Institutions: | Suntory and Toyota International Centres for Economics and Related Disciplines, LSE |
Saved in:
Saved in favorites
Similar items by person
-
Dalmazzo, Alberto, (1992)
-
Where Do Human Capital Externalities End Up To?
Dalmazzo, Alberto, (2005)
-
Skill-Biased Share-Altering Technical Change in Spatial General Equilibrium
Dalmazzo, Alberto, (2011)
- More ...