Achieving efficiency with manipulative bargainers |
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Authors: | Juan Camilo Gmez |
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Institution: | aDepartment of Economics, Macalester College, 1600 Grand Avenue, St. Paul, MN 55105, USA |
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Abstract: | Two agents bargain over the allocation of a bundle of divisible commodities. After strategically reporting utility functions to a neutral arbitrator, the outcome is decided by using a bargaining solution concept chosen from a family that includes the Nash and the Raiffa–Kalai–Smorodinsky solutions. When reports are restricted to be continuous, strictly increasing and concave, it has been shown that this kind of “distortion game” leads to inefficient outcomes. We study the distortion game originated when agents are also allowed to claim non-concave utility functions. Contrasting with the previous literature, any interior equilibrium outcome is efficient and any efficient allocation can be supported as an equilibrium outcome of the distortion game. In a similar fashion to the Nash demand game we consider some uncertainty about the opponent's features to virtually implement the Nash bargaining solution. |
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Keywords: | Bargaining Distortion games Efficiency |
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