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Alternating bid bargaining with a smallest money unit

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<mark>Journal publication date</mark>1990
<mark>Journal</mark>Games and Economic Behavior
Issue number2
Number of pages14
Pages (from-to)188-201
Publication StatusPublished
<mark>Original language</mark>English


In a seminal paper, Ariel Rubinstein has shown that impatience implies determinateness of the two-person bargaining problem. In this note we show that this result depends also on the assumption that the set of alternatives is a continuum. If the pie can be divided only in finitely many different ways (for example, because the pie is an amount of money and there is a smallest money unit), any partition can be obtained as the result of a subgame perfect equilibrium if the time interval between successive offers is sufficiently small. We also show that, for a fixed discount rate, all subgame perfect equilibrium payoffs of the discrete game converge to the solution obtained by Rubinstein if the smallest money unit tends to zero. © 1990.