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. University of Warwick, Department of Economics, Coventry.
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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|
|Number of Pages:||15|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
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