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On risk aversion in the Rubinstein bargaining game

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Kohlscheen, Emanuel and O’Connell, Stephen A. (2008) On risk aversion in the Rubinstein bargaining game. Working Paper. Coventry: University of Warwick, Department of Economics. Warwick economic research papers (No.878).

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Abstract

We derive closed-form solutions for the Rubinstein alternating offers game for cases where the two players have (possibly asymmetric) utility functions that belong to the HARA class and discount the future at a constant rate. We show that risk aversion may increase a bargainers payoff. This result - which contradicts Roth’s 1985 theorem tying greater risk neutrality to a smaller payoff - does not rely on imperfect information or departures from expected utility maximization.

Item Type: Working or Discussion Paper (Working Paper)
Subjects: H Social Sciences > HB Economic Theory
Q Science > QA Mathematics
Divisions: Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH): Game theory, Risk, Utility theory -- Mathematical models, Negotiation
Series Name: Warwick economic research papers
Publisher: University of Warwick, Department of Economics
Place of Publication: Coventry
Official Date: October 2008
Dates:
DateEvent
October 2008Published
Number: No.878
Number of Pages: 15
Status: Not Peer Reviewed
Access rights to Published version: Open Access

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