DOI link to open access article:
On a class of linear-state differential games with subgame individually rational and time consistent bargaining solutions
Journal of Mechanism and Institution Design
Volume 5, issue 1, pages 79-97 (December 2020)
We consider n-person pure bargaining games in which the space of feasible payoffs is constructed via a normal form differential game.
At the beginning of the game the agents bargain over strategies to be played over an infinite time horizon.
An initial cooperative solution (a strategy tuple) is called subgame individually rational (SIR) if it remains individually rational throughout the entire game and time consistent (TC) if renegotiating it at a later time instant yields the original solution.
For a class of linear-state differential games we show that any solution which is individually rational at the beginning of the game satisfies SIR and TC if the space of admissible cooperative strategies is restricted to constants.
We discuss an application from environmental economics.
Keywords: Differential games, bargaining solutions, time consistency.
JEL Classification Numbers: C61, C71, C78.