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The Time-Preference Nash Solution

  • Nir Dagan

    ()

  • Oscar Volij

    ()

  • Eyal Winter

    ()

The primitives of a bargaining problem consist of a set, S, of feasible utility pairs and a disagree- ment point in it. The idea is that the set S is induced by an underlying set of physical outcomes which, for the purposes of the analysis, can be abstracted away. In a very influential paper Nash (1950) gives an axiomatic characterization of what is now the widely known Nash bargaining solution. Rubinstein, Safra, and Thomson (1992) (RST in the sequel) recast the bargaining problem into the underlying set of physical alternatives and give an axiomatization of what is known as the ordinal Nash bargaining solution. This solution has a very natural interpretation and has the interesting property that when risk preferences satisfy the expected utility axioms, it induces the standard Nash bargaining solution of the induced bargaining problem. This property justifies the proper name in the solution’s appellation. The purpose of this paper is to give an axiomatic characterization of the rule that assigns the time-preference Nash outcome to each bargaining problem.

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Paper provided by The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem in its series Discussion Paper Series with number dp265.

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Length: 20 pages
Date of creation: Mar 2001
Date of revision:
Handle: RePEc:huj:dispap:dp265
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  1. Volij, Oscar & Winter, Eyal, 2002. "On risk aversion and bargaining outcomes," Games and Economic Behavior, Elsevier, vol. 41(1), pages 120-140, October.
  2. Nir Dagan & Oscar Volij & Eyal Winter, 2000. "A Characterization of the Nash Bargaining Solution," Economic theory and game theory 018, Nir Dagan, revised 21 Sep 2000.
  3. Safra Zvi & Zilcha Itzhak, 1993. "Bargaining Solutions without the Expected Utility Hypothesis," Games and Economic Behavior, Elsevier, vol. 5(2), pages 288-306, April.
  4. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
  5. van Damme, E.E.C. & Peters, H., 1991. "Characterizing the Nash and Raiffa bargaining solutions by disagreement point axioms," Other publications TiSEM 4bd5eb9e-328a-45a0-aa0a-e, School of Economics and Management.
  6. Grant, Simon & Kajii, Atsushi, 1995. "A Cardinal Characterization of the Rubinstein-Safra-Thomson Axiomatic Bargaining Theory," Econometrica, Econometric Society, vol. 63(5), pages 1241-49, September.
  7. Hanany, Eran & Safra, Zvi, 2000. "Existence and Uniqueness of Ordinal Nash Outcomes," Journal of Economic Theory, Elsevier, vol. 90(2), pages 254-276, February.
  8. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  9. Burgos, Albert & Grant, Simon & Kajii, Atsushi, 2002. "Bargaining and Boldness," Games and Economic Behavior, Elsevier, vol. 38(1), pages 28-51, January.
  10. repec:ner:tilbur:urn:nbn:nl:ui:12-154419 is not listed on IDEAS
  11. Rubinstein, Ariel & Safra, Zvi & Thomson, William, 1992. "On the Interpretation of the Nash Bargaining Solution and Its Extension to Non-expected Utility Preferences," Econometrica, Econometric Society, vol. 60(5), pages 1171-86, September.
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