Folk Theorems in the Negotiation Game with Transaction Costs

Jihong Lee

Assistant Professor, School of Economics, Yonsei University, Seoul 120-749, Korea, Tel: +82-2-2123-5464 jihong.lee@yonsei.ac.kr

JEL Classification: C72, C78

Abstract

Even with complete information, two-person bargaining can generate a large number of equilibria and inefficiencies in (i) negotiation games where disagreement payoffs are endogenously determined (Busch and Wen 1995) and (ii) costly bargaining games where there are transaction costs (Anderlini and Felli 2001). This paper considers a model of negotiation with transaction costs. It is shown that, in contrast to the aforementioned analyses, full Folk theorems are obtained in our model.

Keywords:

Bargaining, Repeated game, Coase theorem, Transaction cost

Acknowledgments

This paper originates from my joint research with Hamid Sabourian, to whom I am grateful for his generous support and guidance.

References

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