Essays on bargaining theory
Author
Özcan Tok, Elif
Advisor
Karagözoğlu, Emin
Date
2018-06Publisher
Bilkent University
Language
English
Type
ThesisItem Usage Stats
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Abstract
Bargaining refers to a situation where two or more agents try to decide over
how to divide a surplus generated by the economic transactions among these
agents. There are two major approaches to bargaining problems: cooperative
and non-cooperative approach. The former one focuses on the axioms that a
bargaining outcome should satisfy and it is initiated by Nash (1950). The latter
one attempts to specify the bargaining procedure and it is pioneered by Stahl
(1972) and Rubinstein (1982). This dissertation consists of five essays. The first
three essays employ the non-cooperative bargaining approach; the remaining ones
employ the cooperative bargaining approach.
In the first essay, we study an infinite horizon bargaining game on a network,
where the network is endogenously formed. Two specifications of the cost structure
regarding the link formation is investigated: zero cost and non-zero cost.
The equilibrium of the game is obtained for both specifications. Lastly, we focus
on efficiency issue and characterize the efficient networks. In the second essay, an
infinite horizon bargaining game between buyers and sellers on a two-sided supply
chain network is analyzed where the valuations of the buyers are heterogeneous.
We prove that the valuations of the buyers and the network structure have an impact
on the equilibrium outcome. In the third essay, we investigate the emergence
of reference points in a two-player, infinite horizon, alternating offers bargaining
game. The preferences of players preferences exhibit reference-dependence, and
their current offers have the potential to in
uence future reference points of each
other. However, this in
uence is limited in that it expires in a finite number of
periods. We describe a subgame perfect equilibrium that involves an immediate
agreement. We study the in
uence of expiration length and reference points on
equilibrium strategies and outcomes. In the fourth essay, we study the salience of
the reference points in determining the anchors and aspirations in a bargaining
problem by introducing two parameters which capture these effects. In the cooperative
bargaining literature, the disagreement point or the reference point is
employed as an anchor while the ideal (or utopia) point or the tempered aspirations
point as an aspiration. In this essay, a bargaining problem with a reference
point is studied incorporating these two parameters and hence a family of bargaining
solutions is obtained. Consequently, several characterizations for each
individual member of this family is proposed. In the fifth essay, we introduce the
iterated egalitarian compromise solution for two-person bargaining problems. It is
defined by using two well-known solutions to bargaining problems, the egalitarian
solution and the equal-loss solution, in an iterative fashion. While neither of these
two solutions satisfy midpoint domination {an appealing normative property{ we
show that the iterated egalitarian compromise solution does so. To sum up, this
dissertation contributes to the diversified fields and practices of bargaining theory.
Keywords
Alternating OffersCooperative Bargaining Theory
Networks
Noncooperative Bargaining Theory
Reference Dependent Preferences