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A characterization of a limit solution for finite horizon bargaining problems

Research paper by Haruo Imai, Hannu Salonen

Indexed on: 13 Oct '11Published on: 13 Oct '11Published in: International Journal of Game Theory



Abstract

We investigate a two-person random proposer bargaining game with a deadline. A bounded time interval is divided into bargaining periods of equal length and we study the limit of the subgame perfect equilibrium outcomes as the number of bargaining periods goes to infinity while the deadline is kept fixed. This limit is close to the discrete Raiffa solution when the time horizon is very short. If the deadline goes to infinity the limit outcome converges to the time preference Nash solution. Regarding this limit as a bargaining solution under deadline, we provide an axiomatic characterization.