scholarly journals Subgame Perfect Equilibrium in the Rubinstein Bargaining Game with Loss Aversion

Complexity ◽  
2019 ◽  
Vol 2019 ◽  
pp. 1-23 ◽  
Author(s):  
Zhongwei Feng ◽  
Chunqiao Tan
Keyword(s):  
Loss Aversion ◽  
Reference Point ◽  
Bargaining Power ◽  
Subgame Perfect Equilibrium ◽  
Reference Points ◽  
Bargaining Game ◽  
The Other ◽  
Nash Bargaining ◽  
Perfect Equilibrium ◽  
High Share

Rubinstein bargaining game is extended to incorporate loss aversion, where the initial reference points are not zero. Under the assumption that the highest rejected proposal of the opponent last periods is regarded as the associated reference point, we investigate the effect of loss aversion and initial reference points on subgame perfect equilibrium. Firstly, a subgame perfect equilibrium is constructed. And its uniqueness is shown. Furthermore, we analyze this equilibrium with respect to initial reference points, loss aversion coefficients, and discount factor. It is shown that one benefits from his opponent’s loss aversion coefficient and his own initial reference point and is hurt by loss aversion coefficient of himself and the opponent’s initial reference point. Moreover, it is found that, for a player who has a higher level of loss aversion than the other, although this player has a higher initial reference point than the opponent, this player can(not) obtain a high share of the pie if the level of loss aversion of this player is sufficiently low (high). Finally, a relation with asymmetric Nash bargaining is established, where player’s bargaining power is negatively related to his own loss aversion and the initial reference point of the other and positively related to loss aversion of the opponent and his own initial reference point.

scholarly journals What Do Bargainers' Preferences Look Like? Experiments with a Convex Ultimatum Game

2003 ◽  
Vol 93 (3) ◽  
pp. 672-685 ◽  
Author(s):  
James Andreoni ◽  
Marco Castillo ◽  
Ragan Petrie
Keyword(s):  
Risk Aversion ◽  
Bargaining Power ◽  
Ultimatum Game ◽  
Subgame Perfect Equilibrium ◽  
The Other ◽  
Perfect Equilibrium

The ultimatum game, by its all-or-nothing nature, makes it difficult to discern what kind of preferences may be generating choices. We explore a game that convexifies the decisions, allowing us a better look at the indifference curves of bargainers while maintaining the subgame-perfect equilibrium. We conclude that bargainers' preferences are convex and regular but not always monotonic. Money-maximization is the sole concern for about half of the subjects, while the other half reveal a preference for fairness. We also found, unexpectedly, the importance of risk aversion among money-maximizing proposers, which in turn generates significant bargaining power for fair-minded responders.

scholarly journals Albanian Aorist and Time Reference Points

2020 ◽  
Vol 10 (3) ◽  
pp. 115
Author(s):  
Muhamet Reçica ◽  
Naser Pajaziti
Keyword(s):  
Reference Point ◽  
Reference Points ◽  
The Other ◽  
Temporal Relations ◽  
Time Dimension ◽  
Relative Time ◽  
Absolute Time ◽  
Temporal System ◽  
The Absolute

Topics related to the structure of the temporal system of Albanian language always give opportunities for new discussions to deal with certain aspects related to various forms of this system, and one of them is the aorist, as a tense containing many semantic, temporal, aspectual, stylistic values, etc. The relationships that exist between the verbal tenses in this system within the absolute time-relative time dimension, which relate to the independent or dependent use of temporal forms against one another in different discoursing contexts, make up an interpretation-based approach to interest. Hence, the essential objective of this paper will be specifically the relations of the Albanian aorist to the other verbal forms, always observed with a time reference point, to illuminate the character of these purely temporal relations against each other under all circumstances of the actions that take place and are displayed by verbal forms in different contexts, relying on the corpus of examined materials.

scholarly journals Green Supply Chain Management with Nash Bargaining Loss-Averse Reference Dependence

Mathematics ◽  
2021 ◽  
Vol 9 (24) ◽  
pp. 3154
Author(s):  
Wentao Yi ◽  
Zhongwei Feng ◽  
Chunqiao Tan ◽  
Yuzhong Yang
Keyword(s):  
Supply Chain ◽  
Loss Aversion ◽  
Reference Point ◽  
Wholesale Price ◽  
Optimal Strategies ◽  
Retail Price ◽  
Nash Bargaining ◽  
Green Supply Chain ◽  
Bargaining Solution ◽  
Efficiency Coefficient

This paper investigates a two-echelon green supply chain (GSC) with a single loss-averse manufacturer and a single loss-averse retailer. Since the Nash bargaining solution exactly characterizes endogenous power and the contribution of the GSC members, it is introduced as the loss-averse reference point for the GSC members. Based on this, a decision model of the two-echelon GSC with loss aversion is formulated. The optimal strategies of price and product green degree are derived in four scenarios: (a) the centralized decision scenario with rational GSC members, namely the CD scenario; (b) the decentralized decision scenario with rational GSC members, namely the DD scenario; (c) the decentralized decision scenario with the GSC members loss-averse, where the manufacturer’s share is below its own loss-averse reference point, namely the DD(∆m ≥ πm) scenario; (d) the decentralized decision scenario with the GSC members loss-averse, where the retailer’s share is below its own loss-averse reference point, namely the DD(∆r ≥ πr) scenario. Then, a comparative analysis of the optimal strategies and profits in these four scenarios is conducted, and the impacts of loss aversion and green efficiency coefficient of products (GECP) on the GSC are also performed. The results show that (i) GECP has a critical influence on the retail price and the wholesale price; (ii) the GSC with loss aversion provide green products with the lowest green degree; (iii) the retail price, the wholesale price and product green degree are decreasing monotonically with the loss aversion level of the GSC member without incurring loss; (iv) furthermore, the effect of the loss aversion level of the GSC member with incurring loss on the optimal strategies is related to GECP and the gap between the GSC members’ loss aversion levels.

AN n-PERSON RUBINSTEIN BARGAINING GAME

2009 ◽  
Vol 11 (01) ◽  
pp. 111-115 ◽  
Author(s):  
PÄR TORSTENSSON
Keyword(s):  
Subgame Perfect Equilibrium ◽  
Bargaining Game ◽  
Discount Factor ◽  
Bargaining Model ◽  
Perfect Equilibrium ◽  
Large Discount ◽  
Alternating Offers ◽  
Rule Out

When Herrero (1985) extends Rubinstein's (1982) alternating-offers bargaining model to the case of three or more players any agreement can be supported as a subgame perfect equilibrium (SPE) outcome, given a sufficiently large discount factor. We show that this is not the case when players demand shares for themselves instead of proposing agreements to each other. Although it is possible to rule out agreements, the majority remains to be SPE outcomes.

A One-Period Version of Rubinstein's Bargaining Game

2003 ◽  
Vol 3 (1) ◽  
Author(s):  
Robert Evans
Keyword(s):  
Pure Strategy ◽  
Infinite Horizon ◽  
Nash Bargaining Solution ◽  
Bargaining Game ◽  
The Other ◽  
Nash Bargaining ◽  
Bargaining Solution ◽  
Small Probability ◽  
Strategy Equilibrium ◽  
Alternating Offers

A one-period, simultaneous-offers bargaining game is analyzed in which, for each player, there is a small probability that his or her proposal will not reach the other player. The unique pure strategy equilibrium offers are identical to those of the Rubinstein (1982) infinite-horizon, alternating-offers bargaining game. This provides a novel interpretation of Rubinstein's result, as well as a new non-cooperative implementation of the Nash Bargaining Solution.

scholarly journals The equal collective gains value in cooperative games

2021 ◽  
Author(s):  
Emilio Calvo Ramón ◽  
Esther Gutiérrez-López
Keyword(s):  
Cooperative Games ◽  
Subgame Perfect Equilibrium ◽  
The Other ◽  
Perfect Equilibrium ◽  
Negotiation Model ◽  
New Class ◽  
Average Productivity

AbstractThe property of equal collective gains means that each player should obtain the same benefit from the cooperation of the other players in the game. We show that this property jointly with efficiency characterize a new solution, called the equal collective gains value (ECG-value). We introduce a new class of games, the average productivity games, for which the ECG-value is an imputation. For a better understanding of the new value, we also provide four alternative characterizations of it, and a negotiation model that supports it in subgame perfect equilibrium.

Detection, Identification, and Estimation of Loss Aversion: Evidence from an Auction Experiment

2014 ◽  
Vol 6 (1) ◽  
pp. 91-133 ◽  
Author(s):  
A. Banerji ◽  
Neha Gupta
Keyword(s):  
Willingness To Pay ◽  
Experimental Evidence ◽  
Loss Aversion ◽  
Reference Point ◽  
Value Distribution ◽  
Reference Points ◽  
Experimental Auction ◽  
Auction Design ◽  
Second Price Auctions

We provide a novel experimental auction design, in which (i) an exogenous decrease in the probability of winning, conditional on the bid, reduces the optimal bid of a loss averse agent whose reference point is expectations based; (ii) observed bid distributions uniquely identify the participants' latent value distribution and loss-aversion parameter. Experimental evidence affirms the presence of such reference points. We show that at the estimated magnitudes of loss aversion, (a) conventional Becker, DeGroot, and Marschak (1964) experiments may lead to large biases in estimated willingness to pay (which our design can correct for); and (b) first-price auctions may fetch moderately higher revenue, compared with second-price auctions. (JEL C91, D44, D82)

BOUNDED RATIONALITY AND ALTERNATING-OFFER BARGAINING

1999 ◽  
Vol 01 (03n04) ◽  
pp. 241-250
Author(s):  
ANA MAULEON ◽  
VINCENT J. VANNETELBOSCH
Keyword(s):  
Bounded Rationality ◽  
Common Knowledge ◽  
Subgame Perfect Equilibrium ◽  
Bargaining Game ◽  
Time Preferences ◽  
Perfect Equilibrium ◽  
Discount Factors ◽  
Common Knowledge Of Rationality

One form of bounded rationality is a breakdown in the commonality of the knowledge that the players are rational. In Rubinstein's two-person alternating-offer bargaining game, assuming time preferences with constant discount factors, common knowledge of rationality is necessary for an agreement on a subgame perfect equilibrium (SPE) partition to be reached (if ever). In this note, assuming time preferences with constant costs of delay, we show that common knowledge of rationality is not necessary to reach always an agreement on a SPE partition. This result is robust to a generalisation, time preferences with constant discount factors and costs of delay, if the players are sufficiently patient.

scholarly journals Cooperate without looking: Why we care what people think and not just what they do

2015 ◽  
Vol 112 (6) ◽  
pp. 1727-1732 ◽  
Author(s):  
Moshe Hoffman ◽  
Erez Yoeli ◽  
Martin A. Nowak
Keyword(s):  
Game Theory ◽  
Evolutionary Game Theory ◽  
Evolutionary Game ◽  
Subgame Perfect Equilibrium ◽  
Categorical Imperative ◽  
Population Based ◽  
Theory Model ◽  
The Other ◽  
Perfect Equilibrium ◽  
Human Interactions

Evolutionary game theory typically focuses on actions but ignores motives. Here, we introduce a model that takes into account the motive behind the action. A crucial question is why do we trust people more who cooperate without calculating the costs? We propose a game theory model to explain this phenomenon. One player has the option to “look” at the costs of cooperation, and the other player chooses whether to continue the interaction. If it is occasionally very costly for player 1 to cooperate, but defection is harmful for player 2, then cooperation without looking is a subgame perfect equilibrium. This behavior also emerges in population-based processes of learning or evolution. Our theory illuminates a number of key phenomena of human interactions: authentic altruism, why people cooperate intuitively, one-shot cooperation, why friends do not keep track of favors, why we admire principled people, Kant’s second formulation of the Categorical Imperative, taboos, and love.

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