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G-83-21

Bargaining on Whales: A Differential Game Model with Pareto Optimal Equilibria

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A two country differential game mode of whaling is used for analysing a dynamic bargaining problem. At a given initial time, the two countries may either continue on a non-cooperative mood of play characterized by an open-loop Nash-equilibrium, or negociate a bargaining solution which we define as the Kalaï-Smorodinsky solution. The cooperative solution calls for a restraint in the whaling efforts which leaves a temptation to cheat for any player. The model shows how, by announcing a credible threat, namely to make whaling an "open-access" fishery, a country can eliminate this temptation to chear and transform the cooperative solution into an equilibrium.

, 11 pages