|Title: ||Complexity and Efficiency in Repeated Games and Negotiation|
|Authors: ||Lee, Jihong|
|Issue Date: ||16-Jun-2004|
|Abstract: ||This paper considers the �negotiation game� (Busch and Wen ) which combines the features of two-person alternating offers and repeated games. Despite the forces of bargaining, the negotiation game in general admits a large number of equilibria, some of which involve delay in agreement and inefficiency. In order to isolate equilibria in this game, we explicitly consider the complexity of implementing a strategy, introduced in the literature on repeated games played by automata. It turns out that when the players have a preference for less complex strategies (even at the margin) only efficient equilibria survive. Thus, complexity and bargaining in tandem may offer an explanation for co-operation in repeated games.|
|Appears in Collections:||Cambridge Working Papers in Economics|
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