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Learning From a Piece of Pie: The Empirical Content of Nash Bargaining

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  • Pierre-André Chiappori

    (Department of Economics, University of Chicago)

  • Olivier Donni

    (THEMA, Université de Cergy-Pontoise)

Abstract

Consider a model of bargaining, in which two players, 1 and 2, share a pie of size $y$. The bargaining environment is described by a set of parameters $\lambda$ that may affect agents' preferences over the agreement sharing, the status quo outcome, or both. The outcomes (i.e., whether an agreement is reached, and if so the individual shares) and the environment (including the size of the pie) are known, but neither the agents' utilities nor their threat points. Assuming that the agents adopt a Nash bargaining solution, we investigate the empirical content of this assumption. We first show that in the most general framework, any outcome can be rationalized as a Nash solution. However, if (i) the size of the pie $y$ does not influence the players' threat points and (ii) there exist (at least) two parameters $\lambda_1$ and $\lambda_2$ that are player-specific, in the sense that $\lambda_i$ does not influence the utility or the threat point of player $j \neq i$, then Nash bargaining generates strong testable restrictions. Moreover, the underlying structure of the bargaining, i.e., the players? utility and threat point functions, can be recovered under slightly more demanding conditions.

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Bibliographic Info

Paper provided by THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise in its series THEMA Working Papers with number 2006-07.

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Date of creation: Feb 2005
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Handle: RePEc:ema:worpap:2006-07

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Keywords: Keywords: Bargaining Game; Nash Solution; Testability; Identifiability; Cardinal Utility;

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References

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  16. Chiappori, P.A. & Ekeland, I., 2006. "The micro economics of group behavior: General characterization," Journal of Economic Theory, Elsevier, vol. 130(1), pages 1-26, September.
  17. Chiappori, Pierre-Andre, 1992. "Collective Labor Supply and Welfare," Journal of Political Economy, University of Chicago Press, vol. 100(3), pages 437-67, June.
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Cited by:
  1. Blundell, Richard & Chiappori, Pierre-André & Magnac, Thierry & Meghir, Costas, 2007. "Collective Labour Supply: Heterogeneity and Nonparticipation," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
  2. Pierre-André Chiappori & Olivier Donni, 2004. "Les modèles non-unitaires de comportement du ménage: un survol de la littérature," Cahiers de recherche 0426, CIRPEE.
  3. Antonio Merlo & Xun Tang, 2010. "Identification and Estimation of Stochastic Bargaining Models, Third Version," PIER Working Paper Archive 11-008, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 11 Mar 2011.
  4. Arianna Degan & Antonio Merlo, 2006. "Do Voters Vote Sincerely? Second Version," PIER Working Paper Archive 07-006, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 03 Jan 2007.
  5. 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.
  6. Arianna Degan & Antonio Merlo, 2007. "Do Voters Vote Sincerely?," NBER Working Papers 12922, National Bureau of Economic Research, Inc.
  7. Arianna Degan & Antonio Merlo, 2007. "Do Voters Vote Ideologically?, Third Version," PIER Working Paper Archive 08-034, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 01 Aug 2008.
  8. Chiappori, Pierre-André & Donni, Olivier, 2009. "Non-unitary Models of Household Behavior: A Survey of the Literature," IZA Discussion Papers 4603, Institute for the Study of Labor (IZA).
  9. Antonio Merlo & Xun Tang, 2011. "Identification and Estimation of Stochastic Bargaining Models, Fourth Version," PIER Working Paper Archive 11-035, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 19 Oct 2011.

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