Judicial Precedent as a Dynamic Rationale for Axiomatic Bargaining Theory
AbstractAxiomatic bargaining theory (e.g., Nash's theorem) is static. We attempt to provide a dynamic justification for the theory. Suppose a Judge or Arbitrator must allocate utility in an (infinite) sequence of two-person problems; at each date, the Judge is presented with a utility possibility set in the nonnegative orthant in two-dimensional Euclidean space. He/she must choose an allocation in the set, constrained only by Nash's axioms, in the sense that a penalty is paid if and only if a utility allocation is chosen at date T which is inconsistent, according to one of the axioms, with a utility allocation chosen at some earlier date. Penalties are discounted with t, and the Judge chooses any allocation, at a given date, that minimizes the penalty he/she pays at that date. Under what conditions will the Judge's chosen allocations converge to the Nash allocation over time? We answer this question for three canonical axiomatic bargaining solutions: Nash's, Kalai-Smorodinsky's, and the 'egalitarian' solution, and generalize the analysis to a broad class of axiomatic models.
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Date of creation: 01 Feb 2010
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Other versions of this item:
- Fleurbaey, Marc & Roemer, John E., 2011. "Judicial precedent as a dynamic rationale for axiomatic bargaining theory," Theoretical Economics, Econometric Society, vol. 6(2), May.
- Marc Fleurbaey & John E. Roemer, 2010. "Judicial Precedent as a Dynamic Rationale for Axiomatic Bargaining Theory," IDEP Working Papers 1002, Institut d'economie publique (IDEP), Marseille, France, revised 07 May 2010.
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior
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- Hougaard, Jens Leth & Moreno-Ternero, Juan D. & Østerdal, Lars Peter, 2012.
"Rationing in the presence of baselines,"
Discussion Papers of Business and Economics
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- Jens L. Hougaard & Juan D. Moreno-Ternero & Lars P. Osterdal, 2012. "Rationing in the presence of baselines," Working Papers 12.04, Universidad Pablo de Olavide, Department of Economics.
- Jens Leth Hougaard & Juan D. Moreno-Ternero & Lars Peter Østerdal, 2010. "Baseline Rationing," Discussion Papers 10-16, University of Copenhagen. Department of Economics.
- Jens Leth Hougaard & Juan D. Moreno-Ternero & Lars Peter Østerdal, 2010. "Baseline Rationing," MSAP Working Paper Series 05_2010, University of Copenhagen, Department of Food and Resource Economics.
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