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The Nash Bargaining Solution and Interpersonal Utility Comparisons

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Abstract

Bargaining theory has a conceptual dichotomy at its core: according to one view, the utilities in the bargaining problem are meaningless numbers (v-N.M utilities), while according to another view they do have concrete meaning (willingness to pay). The former position is assumed by the Nash and Kalai-Smorodinsky solutions, and the latter is assumed by the egalitarian, utilitarian, and equal-loss solutions. In this paper I describe a certain form of equivalence between the set consisting of the former solutions and the set consisting of the latter. This equivalence is the result of an attempt to bridge the gap between the aforementioned views; utilizing this equivalence, I derive a new axiomatization of the Nash solution.

Suggested Citation

  • Rachmilevitch, Shiran, "undated". "The Nash Bargaining Solution and Interpersonal Utility Comparisons," Working Papers WP2012/1, University of Haifa, Department of Economics.
  • Handle: RePEc:haf:huedwp:wp201201
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    1. Geoffroy Clippel, 2007. "An axiomatization of the Nash bargaining solution," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 29(2), pages 201-210, September.
    2. Rachmilevitch, Shiran, "undated". "Fairness, Efficiency, and the Nash Bargaining Solution," Working Papers WP2011/10, University of Haifa, Department of Economics.
    3. Rachmilevitch, Shiran, "undated". "Fairness in Bargaining and the Kalai-Smorodinsky Solution," Working Papers WP2011/12, University of Haifa, Department of Economics.
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    More about this item

    Keywords

    Bargaining; interpersonal utility comparisons; Nash solution;

    JEL classification:

    • 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

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