Efficiency Does Not Imply Immediate Agreement

Sergiu Hart and Zohar Levy

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Gul (Econometrica 1989) introduces a non-cooperative bargaining procedure and claims that the payoffs of the resulting efficient stationary subgame perfect equilibria are close to the Shapley value of the underlying transferable utility game (when the discount factor is close to 1). We exhibit here an example showing that efficiency, even for strictly super-additive games, does not imply that all meetings end in agreement. Thus efficiency does not suffice to get Gul's result.

Journal of Economic Literature Classification Numbers: C71, C72, C78, D4