Perfect Equilibria in a Negotiation Model with Different Time Preferences
Houba, Harold
Wen, Quan
:
2007
Abstract
The players behave quite differently in the negotiation model under different time preferences than under common time preferences. Conventional analysis in this literature relies on the key presumption that all continuation payoffs are bounded from above by the bargaining frontier resulted from stationary contracts. When players have different time preferences, however, intertemporal trade may lead to continuation payoffs above the bargaining frontier. In this paper, we provide a thorough study of this problem when players have different time preferences. Our results tie up all the previous findings, and also clarify the confusion that arose in the past.