Twofold Optimality of the Relative Utilitarian Bargaining Solution
AbstractGiven a bargaining problem, the `relative utilitarian' (RU) solution maximizes the sum total of the bargainer's utilities, after having first renormalized each utility function to range from zero to one. We show that RU is `optimal' in two very different senses. First, RU is the maximal element (over the set of all bargaining solutions) under any partial ordering which satisfies certain axioms of fairness and consistency; this result is closely analogous to the result of Segal (2000). Second, RU offers each person the maximum expected utility amongst all rescaling-invariant solutions, when it is applied to a random sequence of future bargaining problems which are generated using a certain class of distributions; this is somewhat reminiscent of the results of Harsanyi (1953) and Karni (1998).
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2637.
Date of creation: 09 Apr 2007
Date of revision:
relative utilitarian; bargaining solution; impartial observer;
Other versions of this item:
- Marcus Pivato, 2009. "Twofold optimality of the relative utilitarian bargaining solution," Social Choice and Welfare, Springer, vol. 32(1), pages 79-92, January.
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-14 (All new papers)
- NEP-GTH-2007-04-14 (Game Theory)
- NEP-UPT-2007-04-14 (Utility Models & Prospect Theory)
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