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On the consistency of data with bargaining theories

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  • Echenique, Federico

    () (Division of the Humanities and Social Sciences, California Institute of Technology)

  • Chambers, Christopher P.

    () (Department of Economics, University of California, San Diego)

Abstract

We develop observable restrictions of well-known theories of bargaining over money. We suppose that we observe a finite data set of bargaining outcomes, including data on allocations and disagreement points, but no information on utility functions. We ask when a given theory could generate the data. We show that if the disagreement point is fixed and symmetric, the Nash, utilitarian, and egalitarian max-min bargaining solutions are all observationally equivalent. Data compatible with these theories are in turn characterized by the property of comonotonicity of bargaining outcomes. We establish different tests for each of the theories under consideration in the case in which the disagreement point can be variable. Our results are readily applicable, outside of the bargaining framework, to testing the tax code for compliance with the principle of equal loss.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): (Forthcoming)
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Handle: RePEc:the:publsh:1095

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Related research

Keywords: Revealed preference; Nash bargaining;

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  1. Laurens Cherchye & Thomas Demuynck & Bram De Rock, 2012. "Nash-Bargained Consumption Decisions: A Revealed Preference Analysis," ULB Institutional Repository 2013/131704, ULB -- Universite Libre de Bruxelles.
  2. de Clippel, Geoffroy & Eliaz, Kfir, 2012. "Reason-based choice: a bargaining rationale for the attraction and compromise effects," Theoretical Economics, Econometric Society, vol. 7(1), January.
  3. Thomson,William & Lensberg,Terje, 2006. "Axiomatic Theory of Bargaining with a Variable Number of Agents," Cambridge Books, Cambridge University Press, number 9780521027038.
  4. Young, H. P., 1988. "Distributive justice in taxation," Journal of Economic Theory, Elsevier, vol. 44(2), pages 321-335, April.
  5. Daniel S. Hamermesh, 1973. "Who "wins" in wage bargaining?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 26(4), pages 1146-1149, July.
  6. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  7. Pierre-André Chiappori & Olivier Donni & Ivana Komunjer, 2012. "Learning from a Piece of Pie," Review of Economic Studies, Oxford University Press, vol. 79(1), pages 162-195.
  8. Tasos Kalandrakis, 2008. "Rationalizable Voting," Wallis Working Papers WP51, University of Rochester - Wallis Institute of Political Economy.
  9. Özgür Kıbrıs, 2012. "A revealed preference analysis of solutions to simple allocation problems," Theory and Decision, Springer, vol. 72(4), pages 509-523, April.
  10. repec:aea:jeclit:v:43:y:2005:i:4:p:959-988 is not listed on IDEAS
  11. Lensberg, Terje, 1987. "Stability and Collective Rationality," Econometrica, Econometric Society, vol. 55(4), pages 935-61, July.
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