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Aristotle's analysis of bilateral exchange: an early formal approach to the bargaining problem

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  • Rodolphe Dos Santos Ferreira

Abstract

Exchange, as analysed by Aristotle in the Nichomachean Ethics, should be viewed as a bilateral relation to be approached not as a market phenomenon but in terms of cooperation between two contractors. This paper accordingly proposes a reconsideration of Aristotle's analysis in the light of modern bargaining theory. This reconsideration reconciles the two principles of distributive and corrective justice as ruling simultaneously exchange relations through the figures of geometric and arithmetic proportions, respectively. It also suggests a new reconstitution of the missing diagram supposedly illustrating Aristotle's analysis, which — contrary to the conventional square endowed with diagonals, used since Albertus Magnus' commentary — fits the function to which such a diagram was probably designed, that of exhibiting Aristotle's solution to the bargaining problem.

Suggested Citation

  • Rodolphe Dos Santos Ferreira, 2002. "Aristotle's analysis of bilateral exchange: an early formal approach to the bargaining problem," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 9(4), pages 568-590.
    • Handle: RePEc:taf:eujhet:v:9:y:2002:i:4:p:568-590
    DOI: 10.1080/0967256021000024709
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    References listed on IDEAS

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    1. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-518, May.
    2. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    3. William Jaffé, 1974. "Edgeworth's Contract Curve: Part 2. Two figures in its protohistory: Aristotle and Gossen," History of Political Economy, Duke University Press, vol. 6(4), pages 381-404, Winter.
    4. Barry J. Gordon, 1964. "Aristotle and the Development of Value Theory," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 78(1), pages 115-128.
    5. S. Todd Lowry, 1969. "Aristotle's Mathematical Analysis of Exchange," History of Political Economy, Duke University Press, vol. 1(1), pages 44-66, Spring.
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    Cited by:

    1. Rodolphe Santos Ferreira & Ragip Ege, 2022. "The net product in the Formule du Tableau Economique: Lessons from a formalism," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 21(3), pages 383-399, September.
    2. Papatya Duman & Walter Trockel, 2016. "On non-cooperative foundation and implementation of the Nash solution in subgame perfect equilibrium via Rubinstein's game," The Journal of Mechanism and Institution Design, Society for the Promotion of Mechanism and Institution Design, University of York, vol. 1(1), pages 83-107, December.

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