No abstract

This article establishes the relationship between the static axiomatic theory of bargaining and the sequential strategic approach to bargaining. We consider two strategic models of alternating offers. The models differ in the source of the incentive of the bargaining parties to reach agreement: the bargainers' time preference and the risk of breakdown of negotiation. Each of the models has a unique perfect equilibrium. When the motivation to reach agreement is made negligible, in each model the unique perfect equilibrium outcome approaches the Nash bargaining solution, with utilities that reflect the incentive to settle and with the proper disagreement jfoint chosen. The results provide a guide for the application of the Nash bargaining solution in economic modelling.

No abstract

We study a model of a market with three types of agents: sellers, buyers, and middlemen. Buyers and sellers can trade directly or indirectly through the middlemen. The analysis focuses on steady state situations in which the numbers of agents of the different types and hence the trading opportunities are constant over time. The paper provides a framework for analyzing the activity of middlemen and the endogenous determination of the extent of that activity. It highlights the relations between the trading procedure and the distribution of the gains from trade.

The article questions the methodology of "economics and psychology" in its focus on the case of hyperbolic discounting. Using some experimental results, I argue that the same type of evidence, which rejects the standard constant discount utility functions, can just as easily reject hyperbolic discounting as well. Furthermore, a decision-making procedure based on similarity relations better explains the observations and is more intuitive. The article concludes that combining "economics and psychology" requires opening the black box of decision makers instead of modifying functional forms.