see point 2 of Corollary 1). Given the structure of the game under agenda 1, the
parameters α2 and λ2 play exactly the same role under this agenda. When we con-
sider the equilibrium demand xe1 defined in (10) the effects are all unambiguous. In
particular, an increase the between-cake discount factor α2 (or the parameter λ2)
has a positive effects on both players’ payoffs, regardless of players’ rates of time
preference. Instead, the effect of an increase in the relative importance of cake 1 to
player 1 (λ1) is unambiguous both in the case of corner solutions and in the case of
interior solutions. For the latter, player 1 is better off since he is able to extract a
larger share at the first division (point 3 of Corollary 1). In other words, if the first
issue becomes relatively more important to player 1, he is able to extract a larger
share at this stage. Again for the case of corner solutions (point 8 of Corollary 1),
the parameters interact in a less complicated way, in particular xe1 is unchanged but
obviously player 1 is better off.
The effects of a change in the within-cake discount factor δi on players’ payoffs
highlight much more complex relationships among the parameters (even for the case of
corner solutions). Indeed, these effects depend not only on the relationship between
players’ time preferences but also on players’ valuations of the second bargaining
stage. To be more precise, the effect of δ1 on player 1’s payoff is positive when player
1 is more patient than his opponent (δ1 >δ2) and he values the second bargaining
stage more than his opponent does, that is, α1∕λ1 ≥ α2λ2 (see points 4 of corollary
13
More intriguing information
1. The name is absent2. Migration and Technological Change in Rural Households: Complements or Substitutes?
3. The name is absent
4. Endogenous Determination of FDI Growth and Economic Growth:The OECD Case
5. Why Managers Hold Shares of Their Firms: An Empirical Analysis
6. Foreign Direct Investment and Unequal Regional Economic Growth in China
7. Nonparametric cointegration analysis
8. IMMIGRATION POLICY AND THE AGRICULTURAL LABOR MARKET: THE EFFECT ON JOB DURATION
9. AN EXPLORATION OF THE NEED FOR AND COST OF SELECTED TRADE FACILITATION MEASURES IN ASIA AND THE PACIFIC IN THE CONTEXT OF THE WTO NEGOTIATIONS
10. Nurses' retention and hospital characteristics in New South Wales, CHERE Discussion Paper No 52