2016Journal of Mechanism and Institution DesignOpen access

On Non-Cooperative Foundation and Implementation of the Nash Solution in Subgame Perfect Equilibrium via Rubinstein's Game

Papatya Duman, Walter Trockel

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Abstract

In this paper we provide an exact non-cooperative foundation of the Nash solution via a unique (weakly) subgame perfect equilibrium payoff vector in a two-person bargaining game, which is a modification of the well-known alternate offer game by Rubinstein (1982).We also discuss the extent to which our exact and approximate supports of the Nash solution allow an implementation of the Nash solution in (weakly) subgame perfect equilibrium.We show that a sound interpretation as an implementation can only be found in very rare cases where the domains of players' preferences are extremely restricted.

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In this paper we provide an exact non-cooperative foundation of the Nash solution via a unique (weakly) subgame perfect equilibrium payoff vector in a two-person bargaining game, which is a modification of the well-known alternate offer game by Rubinstein (1982).We also discuss the extent to which our exact and approximate supports of the Nash solution allow an implementation of the Nash solution in (weakly) subgame perfect equilibrium.We show that a sound interpretation as an implementation can only be found in very rare cases where the domains of players' preferences are extremely restricted.

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Available abstract

In this paper we provide an exact non-cooperative foundation of the Nash solution via a unique (weakly) subgame perfect equilibrium payoff vector in a two-person bargaining game, which is a modification of the well-known alternate offer game by Rubinstein (1982).We also discuss the extent to which our exact and approximate supports of the Nash solution allow an implementation of the Nash solution in (weakly) subgame perfect equilibrium.We show that a sound interpretation as an implementation can only be found in very rare cases where the domains of players' preferences are extremely restricted.

Key concepts: Subgame perfect equilibrium, Subgame, Mathematical economics, Solution concept, Bargaining problem, Nash equilibrium, Repeated game, Extensive-form game

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