A classification of bargaining solutions by evolutionary origin

Abstract

For games of contracting under perturbed best response dynamics, varying the perturbations along two dimensions (uniform vs. logit, directed vs. undirected) gives four possibilities. Three of these select differing major bargaining solutions as stochastically stable. The fourth possibility yields a new bargaining solution which exhibits significant nonmonotonicities and demonstrates the interplay of two key drivers of evolutionary selection: (i) the ease of making errors; (ii) the ease of responding to errors.