Renegotiation and Symmetry in Repeated Games

Abstract

The paper derives a theory of renegotiation-proofness in symmetric repeated games based on a notion of "equal bargaining power." According to consistent bargaining equilibrium a player can mount a credible objection to a continuation equilibrium in which he receives a particular expected present discounted value, if there are other self-enforcing agreements that never give any player such a low continuation value after any history. The definition does not imply strongly symmetric solutions. But under modest assumptions, consistent bargaining equilibria of infinitely repeated games with perfect monitoring are strongly symmetric. Such solutions have an unusually elementary characterization. Journal of Economic Literature Classification Numbers: C7, C72.