Mechanism Design Based on a Bargaining with a Risk of Breakdown: Application to Commodity Import and Export of China

摘要

This paper established a dynamic bargaining model of international commodity transfer, and analyzed the change of equilibrium in the effect of discount factor and risk of breakdown. According to the improvement of subjective probability with a risk of breakdown, there existed a unique Sub-game Perfect Nash Equilibrium (SPNE). At the same time, we discuss the application to improve the passivity in China trade using this balanced concept of SPNE. The result shows some conclusions. Firstly, the patience in bargaining may lead to more expected return. Secondly, the allocation of profit in the equilibrium depends on the difference among discount rate, subjective probability of the breakdown risk and the breakdown point. Thirdly, the price in equilibrium will higher, if the provider of commodity pay more attention to his subjective probability and depend on his subjective probability.