A three-player dynamic majoritarian bargaining game (Q1876648)

The author considers a three-player constant sum dynamic game with the following structure: At each time \(t=1,2,\ldots \), one of the three players (called the proposer) is randomly chosen (according to the uniform distribution) to propose a division \(x^t = (x^t_1,x^t_2,x^t_3)\) of one dollar among them. Next each player decides if he accepts that division or not. In the situation when at least two players accept it, the division \(x^t\) becomes binding to all of them at time \(t\). Otherwise, the division \(x^{t-1}\) taken at the previous moment \(t-1\) is repeated at time \(t\) (the initial division \(x^0\) at time \(t=0\) is assumed to be arbitrarily fixed). Consequently, a sequence of outcomes \(\{x^t\}^{+\infty}_{t=1}\) results from the game, and the utility of player \(i\), \(i=1,2,3\), is defined by \(V_i(\{x^t\}^{+\infty}_{t=1}) = \sum_{t=1}^{+\infty} \delta^{t-1}u_i(x^t)\), where \(\delta \in [0,1)\) is a common discount factor and \(u_i(x^t)\) is the stage utility of player \(i\) defined in the natural way by \(u_i(x^t) = x^t_i\). It is shown that this dynamic game has a special type of equilibrium, the so-called symmetric Markov perfect Nash equilibrium in stage-undominated strategies. This equilibrium is irrespective of the discount factor and the initial division of the dollar, and has the property that from some moment \(t\), the proposer extracts the whole dollar in all periods. Besides, the players' strategies and the expected utility function induced by that equilibrium have been characterized and calculated in terms of their properties and formulae with full particulars.