The Nash Bargaining Solution in Economic Modelling

@article{binmore-rubinstein-wolinsky-86, abstract = {This article establishes the relationship between the static axiomatic theory of bargaining and the sequential strategic approach to bargaining. We consider two strategic models of alternating offers. The models differ in the source of the incentive of the bargaining parties to reach agreement: the bargainers' time preference and the risk of breakdown of negotiation. Each of the models has a unique perfect equilibrium. When the motivation to reach agreement is made negligible, in each model the unique perfect equilibrium outcome approaches the Nash bargaining solution with utilities that reflect the incentive to settle and with the proper disagreement point chosen. The results provide a guide for the application of the Nash bargaining solution in economic modelling.}, author = {Binmore, Ken and Rubinstein, Ariel and Wolinsky, Asher}, citeulike-article-id = {93161}, journal = {The RAND Journal of Economics}, keywords = {aarmicro, bargaining, microeconomics, tartumicro, tartumicropapers}, number = {2}, pages = {176--188}, posted-at = {2005-02-11 11:31:20}, priority = {3}, title = {The Nash Bargaining Solution in Economic Modelling}, url = {http://www.jstor.org/stable/2555382}, volume = {17}, year = {1986} }

TY - JOUR ID - binmore-rubinstein-wolinsky-86 L3 - citeulike-article-id:93161 N2 - This article establishes the relationship between the static axiomatic theory of bargaining and the sequential strategic approach to bargaining. We consider two strategic models of alternating offers. The models differ in the source of the incentive of the bargaining parties to reach agreement: the bargainers' time preference and the risk of breakdown of negotiation. Each of the models has a unique perfect equilibrium. When the motivation to reach agreement is made negligible, in each model the unique perfect equilibrium outcome approaches the Nash bargaining solution with utilities that reflect the incentive to settle and with the proper disagreement point chosen. The results provide a guide for the application of the Nash bargaining solution in economic modelling. IS - 2 JF - The RAND Journal of Economics EP - 188 TI - The Nash Bargaining Solution in Economic Modelling VL - 17 SP - 176 KW - aarmicro KW - bargaining KW - microeconomics KW - tartumicro KW - tartumicropapers AU - Binmore, Ken AU - Rubinstein, Ariel AU - Wolinsky, Asher PY - 1986/// UR - http://www.jstor.org/stable/2555382 ER -