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Nash’s Bargaining Formula Revisited: A Note on Self-Referential Logic

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Author Info
James Gander
Abstract

The note focuses on the marginal rates of substitution (MRS) in Nash’s product formula solution to bargaining and why the formula works. Two simple examples from duopoly and bilateral monopoly are used to demonstrate that the MRS’s for both players are implicitly in the contract curve and the product formula. They are equal in the former by design. They become equal in the latter in equilibrium. The self-referential logic is evident. The bargaining model or system is self-contained and circular and is analogous to the proposition given by x = F(x).

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File URL: http://www.econ.utah.edu/activities/papers/2008_10.pdf
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Paper provided by University of Utah, Department of Economics in its series Working Paper Series, Department of Economics, University of Utah with number 2008_10.

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Length: 8 pages
Date of creation: Oct 2008
Date of revision:
Handle: RePEc:uta:papers:2008_10

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Related research
Keywords: Bargaining; Pareto Optimum; Self-Referential Logic;

Find related papers by JEL classification:
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
C65 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Miscellaneous Mathematical Tools

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This page was last updated on 2009-11-16.

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