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The Nash Bargaining Solution in Economic Modeling (1986)
| Venue: | Rand Journal of Economics |
| Citations: | 562 - 1 self |
BibTeX
@ARTICLE{Binmore86thenash,
author = {Ken Binmore and Ariel Rubinstein and Asher Wolinsky},
title = {The Nash Bargaining Solution in Economic Modeling},
journal = {Rand Journal of Economics},
year = {1986},
pages = {176--188}
}
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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 jfoint chosen. The results provide a guide for the application of the Nash bar-gaining solution in economic modelling. 1.
