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Bargaining: Nash, Consensus, or Compromise?

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  • Li, Xiangliang

Abstract

We propose two solutions to Nash (1950)'s bargaining problem: the Consensus and Compromise solutions. They gradually diverge from the Nash solution. Regarding axioms, we decompose the Nash solution's Axiom IIA (Independence of Irrelevant Alternatives) into distinct parts. The controversial ones are identified and successively replaced, leading to the Consensus and Compromise solutions. The two replacement parts are: 1). If the additional room for cooperation, resulting from deteriorating non-cooperation, does not offer a better outcome for both players, the solution remains unchanged; 2). A solution should not be the best only for one player, i.e., each player should make at least some concession, no matter how small.

Suggested Citation

  • Li, Xiangliang, 2023. "Bargaining: Nash, Consensus, or Compromise?," Games and Economic Behavior, Elsevier, vol. 142(C), pages 730-742.
    • Handle: RePEc:eee:gamebe:v:142:y:2023:i:c:p:730-742
    DOI: 10.1016/j.geb.2023.09.011
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    Keywords

    Bargaining; Nash solution; Consensus; Compromise; No-cooperation; Cooperation;
    All these keywords.

    JEL classification:

    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • 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

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