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2000): “Multiperson bargaining and strategic complexity

By Kalyan Chatterjee and Hamid Sabourian

Abstract

We investigate the e®ect of introducing costs of complexity in the n-person unanimity bargaining game. As is well-known, in this game every individually rational allocation is sustainable as a Nash equilibrium (also as a subgame perfect equilibrium if players are su±ciently patient and if n> 2). Moreover, delays in agreement are also possible in such equilibria. By limiting ourselves to a plausible notion of complexity that captures length of memory, we ¯nd that the introduction of complexity costs (lexicographically with the standard payo®s) does not reduce the range of possible allocations but does limit the amount of delay that can occur in any agreement. In particular, we show that in any n-player game, for any allocation z; an agreement on z at any period t can be sustained as a Nash equilibrium of the game with complexity costs if and only if t · n: We use the limit on delay result to establish that, in equilibrium, the strategies implement stationary behaviour. Finally, we also show that \noisy Nash equilibrium " with complexity costs sustains only the unique stationary subgame perfect equilibrium allocation

Topics: Bargaining, complexity, history independence, equilibrium selection. JEL classi¯cation, C7, D0, D7
Year: 2013
OAI identifier: oai:CiteSeerX.psu:10.1.1.319.3841
Provided by: CiteSeerX
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