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Bargaining with Linked Disagreement Points

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  • Justin Leroux
  • Walid Marrouch

Abstract

In the context of bilateral bargaining, we deal with issue linkage by developing a two-issue cooperative bargaining model. In contrast to the traditional Nash bargaining literature, the axioms we propose focus on the role of the disagreement points. We characterize a new solution that we call the Linked Disagreement Points (LDP) solution, which explicitly links the players' bargaining powers on each issue. We then weaken our axioms in turn, and a family of bargaining rules stands out: the Equal Net Ratio Solutions . These solutions point to Pareto-efficient outcomes such that the relative gains for players are equal across issues. We discuss our results in light of international trade and environmental negotiations, which are often put on the bargaining table in a linked fashion.
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Suggested Citation

  • Justin Leroux & Walid Marrouch, 2011. "Bargaining with Linked Disagreement Points," CIRANO Working Papers 2011s-30, CIRANO.
    • Handle: RePEc:cir:cirwor:2011s-30
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    File URL: https://cirano.qc.ca/files/publications/2011s-30.pdf
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    Keywords

    Multi-issue bargaining; issue linkages; axiomatic solutions; disagree-ment point. ; Négociations Multi-sujets; inter-connexion des sujets; solutions axiomatiques; point de Menace.;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

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