Tough Behavior in the Repeated Bargaining Game. A Computer Simulation Study

Abstract

Bargaining behavior occupies an important part in economics literature, or social sciences in general. Although there is an extensive simulation literature on social tradeoff in the Prisoner's Dilemma and the one-shot bargaining game, little has been done for the repeated bargaining game. Part of reason for this neglect is that, despite having a continuum of Nash equilibria, under homogeneous settings, the one shot bargaining game consistently gives a stable equilibrium of fairness (50-50 division), robust to many kind of tough perturbations. However, it's true that social interaction doesn't always yield unconditional egalitarianism. Hence we simulate a population of homogeneous agents playing the repeated bargaining game to test the stability of the 50-50 norm under evolutionary force. It turns out that when it comes to repeated interaction, the fair norm no longer stands strong.