On risk aversion in the Rubinstein bargaining game
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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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|
|Number of Pages:||15|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
 Binmore, K. (2007a) Does game theory work? The bargaining challenge. Cambridge, MA. MIT Press.
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