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Judicial precedent as a dynamic rationale for axiomatic bargaining theory

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  • Fleurbaey, Marc

    () (CNRS and Université Paris Descartes)

  • Roemer, John E.

    () (Departments of Political Science and Economics, Yale University)

Abstract

Axiomatic 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.

Suggested Citation

  • Fleurbaey, Marc & Roemer, John E., 2011. "Judicial precedent as a dynamic rationale for axiomatic bargaining theory," Theoretical Economics, Econometric Society, vol. 6(2), May.
  • Handle: RePEc:the:publsh:588
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    Cited by:

    1. Jens Leth Hougaard & Juan D. Moreno-Ternero & Lars Peter Østerdal, 2010. "Baseline Rationing," Discussion Papers 10-16, University of Copenhagen. Department of Economics.
      • Jens L. Hougaard & Juan D. Moreno-Ternero & Lars P. Østerdal, 2011. "Baseline Rationing," Working Papers 2011-04, Universidad de Málaga, Department of Economic Theory, Málaga Economic Theory Research Center.
      • 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.
    2. Sylvain Béal & Marc Deschamps, 2016. "On compensation schemes for data sharing within the European REACH legislation," European Journal of Law and Economics, Springer, pages 157-181.
    3. Jens Hougaard & Juan Moreno-Ternero & Lars Østerdal, 2013. "Rationing in the presence of baselines," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, pages 1047-1066.
    4. repec:spr:sochwe:v:49:y:2017:i:3:d:10.1007_s00355-017-1088-y is not listed on IDEAS

    More about this item

    Keywords

    Axiomatic bargaining theory; judicial precedent; dynamic foundations; Nash's bargaining solution;

    JEL classification:

    • 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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