Neudert, Matthias
(2020)
Virtual Bargaining: A new Disagreement Point and Interpretation.
[Preprint]
Abstract
Virtual bargaining tries to explain why some actions suggested in games by best response reasoning appear unreasonable and why real players often succeed easily in some coordination problems, although orthodox game theory is unable to resolve them. Yet the original account of virtual bargaining was lacking a proper mathematical formalism, a convincing motivation for players to follow the reasoning as well as a deliberate notion of the feasible agreements and the disagreement point. However, the ideas of two recent papers on virtual bargaining, one of them yet unpublished, can overcome some of the initial problems, while also raising new issues.
I will argue here that the latest account rests on an implausible disagreement point, an in general unintuitive assumption of non-spiteful best responses and an inconsistent definition of the worst payoff function. Yet I propose a new disagreement point, which I argue to be convincing and which justifies a slightly weaker assumption than non-spitefulness for an arbitrary number of players such that virtual bargaining accounts for the phenomena, it tries to explain. Moreover, I will adequately generalize the worst payoff function and the virtual bargaining equilibrium (VBE) for n-player games, while also outlining the epistemic conditions for a VBE to be chosen.
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