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On time-inconsistency in bargaining

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Kodritsch, Sebastian

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Corporate Editor Wissenschaftszentrum Berlin für Sozialforschung gGmbH
Abstract This paper analyzes dynamically inconsistent time preferences in Rubinstein's (1982) seminal model of bargaining. When sophisticated bargainers have time preferences that exhibit a form of present bias -satisfied by the hyperbolic and quasi-hyperbolic time preferences increasingly common in the economics literature- equilibrium is unique and lacks delay. However, when one bargainer is more patient about a single period's delay from the present than one that occurs in the near future, the game permits a novel form of equilibrium multiplicity and delay. Time preferences with this property have most recently been empirically documented; they can also arise when parties who weight probabilities non-linearly bargain under the shadow of exogenous breakdown risk, as well as in settings of intergenerational bargaining with imperfect altruism. The paper's main contributions are (i) a complete characterization of the set of equilibrium outcomes and payoffs for separable time preferences, and (ii) present bias as a readily interpretable sufficient condition for uniqueness at the level of individual preferences. (author's abstract)
Keywords time management; equilibrium; collective bargaining
Classification Sociology of Economics; Income Policy, Property Policy, Wage Policy
Document language English
Publication Year 2014
City Berlin
Page/Pages 52 p.
Series Discussion Papers / Wissenschaftszentrum Berlin für Sozialforschung, Forschungsschwerpunkt Markt und Entscheidung, Abteilung Verhalten auf Märkten, SP II 2014-205
Status Published Version; reviewed
Licence Deposit Licence - No Redistribution, No Modifications