Bargaining 101

When two actors negotiate a price, there is often a range of deals the parties find mutually acceptable. The bargaining problem is figuring out which price they will ultimately settle on.

This course covers the technical aspects of bargaining theory and explain how parties can sway negotiations in their favor. For more applications on bargaining, consider picking up a copy of Game Theory 101: Bargaining.

(Lectures to follow. This course is ongoing.)

The Prelude

  1. The Bargaining Problem
  2. Using Game Theory
  3. Sources of Bargaining Power

The Ultimatum Game

  1. The Ultimatum Game’s Assumptions
  2. The Ultimatum Game (Discrete)
  3. Other Solutions to the Ultimatum Game
  4. The Ultimatum Game (Continuous)
  5. Ultimatum Game Uniqueness Proof

Bargaining with Counteroffers

  1. The Power of Counteroffers
  2. The “Power” of Rejection
  3. Alternating Offers

Rubinstein Bargaining

  1. Rubinstein Bargaining
  2. First Offer Advantage
  3. Rubinstein Convergence Proof
  4. Why the Rich Get Richer
  5. Rubinstein Uniqueness Proof

Increasing Bargaining Power

  1. The Power of Outside Options
  2. The Value of Being Unique
  3. Risky Business
  4. Making Threats Credible

Bargaining Under Uncertainty

  1. Introduction to Uncertainty
  2. Uncertainty and Bargaining Failure
  3. Incentives to Misrepresent
  4. Knowledge Is Power
  5. Risk-Return Tradeoff
  6. Playing It Safe
  7. Uncertainty with Continuous Types
  8. The Myserson-Satterthwaite Theorem
  9. The Skimming Property

More to come…