Strategic Bargaining in a Dynamic Economy

Strategic bargaining for the control of a dynamic system in state-space form

“…As in the strategic bargaining model for the partition of a pie these proposals have to be subgame perfect. Strategic bargaining in the context of a difference game has already been suggested and analysed (Stefanski and Cichocki, 1986;Houba and de Zeeuw, 1991). However, in these papers it is assumed that the disagreement actions are exogenously prescribed by, for example, the feedback or open-loop Nash equilibrium of the difference game.…”

“…The disagreement control vector of player i, i-1,2, at time t, t E T, is denoted by ud(t) E U;(f). In the alt~rnating offer model (Rubinstein, 1982) and in eatlier attempta to incorporate strategic bargaining into difference gamea (Cichocki andStefanaki, 1986, Houba andde Zeeuw, 1991) the disagreement controle were exogenoualy given. However, in the model of this paper the disagreement controla form an integral part of the subgame perfect equilibria of the bargaining game.…”