AN EVOLUTIONARY MODEL OF BARGAINING

Individuals from two populations of bargainers are randomly matched to play the Nash demand game. They make their demands by choosing best replies based on an incomplete knowledge of the precedents, and occasionally they choose randomly. There is no common knowledge. Over the long run, typically one division will be observed almost all of the time. This “stochastically stable” division is close to the Nash solution when all agents in the same population are alike. When the populations are heterogeneous, a generalization of the Nash solution results. If there is some mixing between the two populations, the stable division is fifty-fifty. Journal of Economic Literature Classification Number: C78. © 1993 Academic Press, Inc.