Game theory reveals winning strategy for maximizing bargaining power and payoffs
The article explores how players in repeated games can split the surplus by offering enforceable contracts. By introducing various behavioral types for players, the study predicts how the surplus will be divided. Rational players imitate a behavioral type and engage in a war of attrition to maximize their payoff. Following the "Nash bargaining with threats" theory, players can secure their fair share by consistently asking for it and taking recommended actions as a threat. The results suggest that certain payoffs are favored in dynamic games, contrary to traditional game theory predictions.