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Nash bargaining solution - MIT OpenCourseWare

: Game theory with Engineering Applications Lecture 14: Nash bargaining solution Asu Ozdaglar MIT March 30, 2010 1 Game theory : Lecture 14 Introduction Outline Rubinstein bargaining Model with Alternating Offers Nash bargaining solution Relation of Axiomatic and Strategic Model Reference: Osborne and Rubinstein, bargaining and Markets. 2 Game theory : Lecture 14 Strategic Model Introduction In this lecture, we discuss an axiomatic approach to the bargaining problem. In particular, we introduce the Nash bargaining solution and study the relation between the axiomatic and strategic (noncooperative) models. As we have seen in the last lecture, the Rubinstein bargaining model allows two players to offer alternating proposals indefinitely, and it assumes that future payoffs of players 1 and 2 are discounted by 1, 2 (0, 1). 3 Game theory : Lecture 14 Strategic Model Rubinstein bargaining Model with Alternating Offers We showed that the following stationary strategy profile is a subgame perfect equilibrium for this game.

Mar 30, 2010 · Game Theory: Lecture 14 Strategic Model Rubinstein Bargaining Model with Alternating Offers We showed that the following stationary strategy profile is a subgame perfect equilibrium for this game. Player 1 proposes x∗ and accepts offer y if, and only if, y ≥ y 1 ∗. 1 Player 2 proposes y ∗ and accepts offer x if, and only if, x ≥ x ...

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