Behavioral Economics Commons^™

Sequential Bargaining Mechanisms, Peter Cramton

Peter Cramton

The introductory discussion presented in this chapter considers the simplest type of sequential bargaining games in which the players’ time preferences are described by known and fixed discount rates. I begin by characterizing the class of perfect bargaining mechanisms, which satisfy the desirable properties of incentive compatibility (i.e., each player reports his type truthfully), individual rationality (i.e., every potential player wishes to play the game), and sequential rationality (i.e., it is never common knowledge that the mechanism induced over time is dominated by an alternative mechanism). It is shown that ex post efficiency is unobtainable by any incentive-compatible and individually …