Custom Search
Bargaining problem constraints:
1. legal laws
2. physical laws
There can be conflict and cooperation in a deal. If no deal is made, you are in iniitial endowment. There are gains made from trade (more gains the more different people usually).
There are three general instruments that help to sustain "agreement"
1. law
2. social norm
3. moral code
Game - 2 people, both can choose AB
|
1\2 |
a |
b |
|
a |
15 15 |
0 20 |
|
b |
20 0 |
10 10 |
assume that they choose at the same time. If there is no way of enforcing the game then they will choose bb.
stradegy a conditional plan af conditional actions.
Prefferences can be ranked as B,A > AA, BB, A,B
Gilt would mean people will feel bad afterwards and the payoff matrix will be different.