ECON 4180 Lecture Notes - Lecture 10: Bargaining Problem, Spot Contract, Subgame
28 Mar 2016
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This chapter is simple and concise, but is very fun to read. So, my lecture note is not even a good summary of the book. I only take some technical notes from it. 1 joint decisions: a real-world negotiation process may include lots of things: threats, sob- drama, blu ng, cheating, etc. However, the point of game-theoretic modeling is not to catch all of them; it"s the opposite: a typical contracting includes both (1) phases of negotiation and (2) phases of following the contract. Here we would like to focus on (2) by summarizing (1) with simple disagreement points: speci cally, we introduce joint-decision nodes in the game three. At this note, players negotiate and establish a contract. Also, the below game three corresponds to one example in the standard bargaining problem. 1: because more than one player is involved for a joint decision node, the information set de nition is extended to multiple players (or group of players).
