Simultaneous Nash Bargaining with Consistent Beliefs
AbstractWe propose and analyze a new solution concept, theR-solution, for three-person, transferable utility, cooperative games. In the spirit of the Nash Bargaining Solution, our concept is founded on the predicted outcomes of simultaneous, two-party negotiations that would be the alternative to the grand coalition. These possibly probabilistic predictions are based on consistent beliefs. We analyze the properties of theR-solution and compare it with the Shapley value and other concepts. The R-solution exists and is unique. It belongs to the bargaining set and to the core whenever the latter is not empty. In fact, when the grand coalition can simply execute one of the three possible bilateral trades, the R-solution is the most egalitarian selection of the bargaining set. Finally, we discuss how theR-solution changes important conclusions of several well known Industrial Organization models.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 521.
Date of creation: Nov 2010
Date of revision:
cooperative games; bargaining; endogenous fallback options; consistent beliefs; R-solution;
Other versions of this item:
- Roberto Burguet & Ramon Caminal, 2010. "Simultaneous Nash Bargaining with Consistent Beliefs," UFAE and IAE Working Papers 854.10, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
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