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Lecture Bargaining Theory
In the module we explore quantitative and mathematical methods of economic theory. We focus on decision processes involving multiple stakeholders, their negotiations and their agreements. Even with conflicting interests, decision makers can reach mutually beneficial outcomes through negotiation and compromise. We discuss what makes some decision makers more willing to cooperate and make commitments, and what makes other decision makers more reluctant to compromise. Understanding the negotiation and decision-making processes that shape sustainable outcomes supports the understanding of topics like climate negotiations, the management of shared resources, the participation of stakeholders and the balancing of diverse interestsThis is a course with a more technical topic. For this course the online format offers benefits for learning that we miss in a traditional lecture room. Online videos allow you to follow your own learning speed. You can (and you should) pause your video, slow down or fast forward according to your individual learning speed. Weekly online homeworks give you regular feedback and help you to engage with the material. Online discussions and exercises provide and enhance interaction.
As a result, the online format gives you a much better learning experience and more room to interact. For this course, students are clearly more successful with online teaching than students with traditional teaching. In the past, with traditional classroom teaching, about 25% of the students failed the course. Now, with on-line teaching, fewer than 5% of the students fail.
You can obtain 1/3 of the total points (130 points) with the homework. You can obtain 2/3 of the total points (260 points) in the exam on 04.08.2025, 08:30.
At the end of the term, you will find extra (optional) problem sets in Moodle. These problem sets are similar in style to the exam. If you want to improve your routine for the exam, you can try these problems as often as you like. However, these extra problems don't count for your grade.
You find the access code for the online meeting Moodle. Before joining the meeting, you should have watched the videos and you should have made an attempt to solve the homework. Please come in time and, if possible, activate your camera. I don't plan to introduce new material in the discussion board or online meeting.
- You obtain up to 1/3 of the total points (130 points) in the weekly homework.
- You obtain up to 2/3 of the total points (260 points) in the exam on 04.08.2025, 08:30, . The style of the questions in the take home exam on 04.08.2025, 08:30, will be similar to the questions in the weekly homework.
The sum of the points (up to 390 points) determines your grade. I assume that, pursuant to the »Prüfungsordnung«, the weekly homework and the take home exam constitute a single partial exam.
- Date: 04.08.2025, 08:30 (online). You can write the exam at home — provided you have a good connection to the internet. If you prefer to write at the FSU Jena, please let me know.
- Resit of the final exam: 10.10.2025, 10:30 (online).
Students who want to take the resit of the final exam must register in time with the examination office.
- Instructions for the exam
- If you want to obtain credits for the course, please do not forget to register for the exam!
- Preparing for the exam: During the term you should solve the problems from the weekly homework. During the last weeks of the term, you will find in Moodle “extra questions”. This is a quiz, similar in style to the exam, that you can take as often as you want. Each time you take this quiz you get a new collection of problems. When you submit these extra questions exam, you will get immediate feedback. You can work on these extra questions to get more routine for your exam. Points scored in this quiz don't contribute to your final grade.
- Kalai, E. & M. Smorodinsky (1975): “Other Solutions to Nash`s Bargaining Problem”, Econometrica, 43, 513-518.Jstor
- Muthoo, A. (1999): Bargaining theory with applications. Cambridge Univ. Press, Cambridge
- Osborne, M. J. & A. Rubinstein (1990): Bargaining and markets. Academic Press, San Diego.
- Roth, A. E. (1995): Bargaining Experiments , ch. 4 in The Handbook of Experimental Economics, ed. by J. H. Kagel & A. E. Roth.
- Shaked, A. and J. Sutton (1984), Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model , Econometrica 52, 1351 1364 Jstor
Topic | Lecture | Exercise |
1. Introduction, von Neumann-Morgenstern Utility, Nash's axioms. | 07.04.2025 | 14.04.2025 |
2. Nash's theorem, applications. | 14.04.2025 | 21.04.2025 |
3. Risk aversion, applications (bribery, asset ownership). | 21.04.2025 | 28.04.2025 |
4. Discussion of Nash's axioms. | 28.04.2025 | 05.05.2025 |
5. Applications (moral hazard in teams). | 05.05.2025 | 12.05.2025 |
6. The strategic approach: Rubinstein's model. | 12.05.2025 | 19.05.2025 |
7. Strategies in bargaining in the alternating offers model. Nash equilibrium. | 19.05.2025 | 26.05.2025 |
8. Subgame perfect equilibrium. | 26.05.2025 | 02.06.2025 |
9. Constant discount rates, fixed bargaining cost, finitely divisible pies. | 02.06.2025 | 09.06.2025 |
10. Outside options | 09.06.2025 | 16.06.2025 |
11. More than two players, comparison Rubinstein/Nash | 16.06.2025 | 23.06.2025 |
12. Incomplete information. | 23.06.2025 | 30.06.2025 |
13. Markets and decentralised trade. | 30.06.2025 | 07.07.2025 |
14. Summary, exercises, discussion board, Q+A. | 07.07.2025 | 14.07.2025 |
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