Strategic Bargaining and Full Efficiency

In strategic bargaining, Bolton (1991) assumes that the decider feels envy or inequality aversion, Rabin (1997) characterized how fairness affects bargaining efficiency and distribution of bargaining outcomes, but leaves tolerance open. It is a difficult topic to incorporate tolerance to fair bargaining structure, and discuss bargaining outcomes. In this paper, we consider decider withholding cooperation from proposer even if the proposer mistreated the decider, and explore the proposer's force and the decider's deciding power. For self-interested and tolerably fair motivated preferences, we present some results predictable in classical game theoretic perspective. When full efficiency is obtained as the maximum payoffs possible are reached when parties make the type of small sacrifices people make all the time to cooperate with one another, we can characterize full efficiency. Since our bargaining structure incorporates tolerance, our results extends (Bolton, 1991, Rabin, 1997).