Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101451
Authors: 
Kodritsch, Sebastian
Year of Publication: 
2014
Series/Report no.: 
WZB Discussion Paper SP II 2014-205
Abstract: 
This paper analyzes dynamically inconsistent time preferences in Rubinstein's (1982) seminal model of bargaining. When sophisticated bargainers have time preferences that exhibit a form of present bias - satisfied by the hyperbolic and quasi-hyperbolic time preferences increasingly common in the economics literature - equilibrium is unique and lacks delay. However, when one bargainer is more patient about a single period's delay from the present than one that occurs in the near future, the game permits a novel form of equilibrium multiplicity and delay. Time preferences with this property have most recently been empirically documented; they can also arise when parties who weight probabilities non-linearly bargain under the shadow of exogenous breakdown risk, as well as in settings of intergenerational bargaining with imperfect altruism. The paper's main contributions are (i) a complete characterization of the set of equilibrium outcomes and payoffs for separable time preferences, and (ii) present bias as a readily interpretable sufficient condition for uniqueness at the level of individual preferences.
Subjects: 
bargaining
time preference
dynamic inconsistency
delay
JEL: 
C78
D03
D74
Document Type: 
Working Paper

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