A continuous time model of bilateral bargaining
OA Version
Citation
J Ortner. 2017. "A Continuous Time Model of Bilateral Bargaining."
Abstract
This paper constructs a continuous-time model of bilateral bargaining to study how
fluctuations in bargaining power affect the outcomes of negotiations. The paper deals
with the technical complexities that arise when modeling games in continuous time by
building strategy restrictions into the equilibrium definition. These restrictions select a
unique equilibrium, which is characterized by a system of ordinary differential equations.
This unique equilibrium corresponds to the limiting subgame perfect equilibrium of
discrete-time bargaining games with frequent offers.