Nash meets Rubinstein in final-offer arbitration
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I consider a final-offer arbitration model in which the offers are submitted sequentially, the parties are allowed to accept offers, and the arbitrator maximizes Nash's social welfare function. I show that backwards induction in this three-period model leads to the subgame-perfect equilibrium outcome of Rubinstein's infinite-horizon alternating-offer bargaining game.
DepartmentMassachusetts Institute of Technology. Department of Economics
Yildiz, Muhamet. “Nash Meets Rubinstein in Final-Offer Arbitration.” Economics Letters 110, no. 3 (March 2011): 226–30.
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