IDEAS home Printed from
   My bibliography  Save this paper

On Risk Aversion and Bargaining Outcomes


  • Volij, Oscar
  • Winter, Eyal


We revisit the well-known result that asserts that an increase in the degree of one's risk aversion improves the position of one's opponents. To this end, we apply Yaari's dual theory of choice under risk both to Nash's bargaining problem and to Rubinstein's game of alternating offers. Under this theory, unlike under expected utility, risk aversion influences the bargaining outcome only when this outcome is random, namely, when the players are risk lovers. In this case, an increase in one's degree of risk aversion increases one's share of the pie.

Suggested Citation

  • Volij, Oscar & Winter, Eyal, 2002. "On Risk Aversion and Bargaining Outcomes," Staff General Research Papers Archive 10130, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:10130

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Roth, Alvin E, 1985. "A Note on Risk Aversion in a Perfect Equilibrium Model of Bargaining," Econometrica, Econometric Society, vol. 53(1), pages 207-211, January.
    3. Oscar Volij, 1999. "Utility Equivalence in Sealed Bid Auctions and the Dual Theory of Choice Under Risk," Economic theory and game theory 009, Oscar Volij, revised 25 Mar 1999.
    4. Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
    5. Demers, Fanny & Demers, Michel, 1990. "Price uncertainty, the competitive firm and the dual theory of choice under risk," European Economic Review, Elsevier, vol. 34(6), pages 1181-1199, September.
    6. Roth, Alvin E, 1989. "Risk Aversion and the Relationship between Nash's Solution and Subgame Perfect Equilibrium of Sequential Bargaining," Journal of Risk and Uncertainty, Springer, vol. 2(4), pages 353-365, December.
    7. Safra, Zvi & Zhou, Lin & Zilcha, Itzhak, 1990. "Risk Aversion in the Nash Bargaining Problem with Risky Outcomes and Risky Disagreement Points," Econometrica, Econometric Society, vol. 58(4), pages 961-965, July.
    8. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    9. Safra Zvi & Zilcha Itzhak, 1993. "Bargaining Solutions without the Expected Utility Hypothesis," Games and Economic Behavior, Elsevier, vol. 5(2), pages 288-306, April.
    10. Volij, Oscar, 2002. "Payoff equivalence in sealed bid auctions and the dual theory of choice under risk," Economics Letters, Elsevier, vol. 76(2), pages 231-237, July.
    11. Kannai, Yakar, 1977. "Concavifiability and constructions of concave utility functions," Journal of Mathematical Economics, Elsevier, vol. 4(1), pages 1-56, March.
    12. Sobel, Joel, 1981. "Distortion of Utilities and the Bargaining Problem," Econometrica, Econometric Society, vol. 49(3), pages 597-619, May.
    13. Thomson, William, 1988. "The Manipulability of the Shapley-Value," International Journal of Game Theory, Springer;Game Theory Society, vol. 17(2), pages 101-127.
    14. Nir Dagan & Oscar Volij & Eyal Winter, 2001. "The Time-Preference Nash Solution," Economic theory and game theory 014, Oscar Volij.
    15. Murnighan, J Keith & Roth, Alvin E & Schoumaker, Francoise, 1988. "Risk Aversion in Bargaining: An Experimental Study," Journal of Risk and Uncertainty, Springer, vol. 1(1), pages 101-124, March.
    16. Hadar, Josef & Seo, Tae Kun, 1995. "Asset diversification in Yaari's dual theory," European Economic Review, Elsevier, vol. 39(6), pages 1171-1180, June.
    17. Roth, Alvin E & Rothblum, Uriel G, 1982. "Risk Aversion and Nash's Solution for Bargaining Games with Risky Outcomes," Econometrica, Econometric Society, vol. 50(3), pages 639-647, May.
    18. 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 1171-1186, September.
    19. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, July.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Volij, Oscar, 2002. "A remark on bargaining and non-expected utility," Mathematical Social Sciences, Elsevier, vol. 44(1), pages 17-24, September.
    2. Driesen, Bram & Lombardi, Michele & Peters, Hans, 2016. "Feasible sets, comparative risk aversion, and comparative uncertainty aversion in bargaining," Journal of Mathematical Economics, Elsevier, vol. 67(C), pages 162-170.
    3. Nir Dagan & Oscar Volij & Eyal Winter, 2001. "The Time-Preference Nash Solution," Economic theory and game theory 014, Oscar Volij.
    4. Rosato, Antonio, 2017. "Sequential negotiations with loss-averse buyers," European Economic Review, Elsevier, vol. 91(C), pages 290-304.
    5. Rausser, Gordon C. & Simon, Leo K., 2016. "Nash bargaining and risk aversion," Games and Economic Behavior, Elsevier, vol. 95(C), pages 1-9.
    6. Cressman, Ross & Gallego, Maria, 2009. "On the ranking of bilateral bargaining opponents," Mathematical Social Sciences, Elsevier, vol. 58(1), pages 64-83, July.
    7. repec:eee:reensy:v:169:y:2018:i:c:p:95-104 is not listed on IDEAS
    8. Huang, Rachel J. & Huang, Yi-Chieh & Tzeng, Larry Y., 2013. "Insurance bargaining under ambiguity," Insurance: Mathematics and Economics, Elsevier, vol. 53(3), pages 812-820.
    9. Kohlscheen, Emanuel & O’Connell, Stephen, 2008. "On Risk Aversion in the Rubinstein Bargaining Game," The Warwick Economics Research Paper Series (TWERPS) 878, University of Warwick, Department of Economics.
    10. Anna Conte & Werner Güth & Paul Pezanis-Christou, 2017. "More Money vs More Certainty? Behaviour in Stochastic Alternating-Offer Experiments," School of Economics Working Papers 2017-06, University of Adelaide, School of Economics.

    More about this item

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:isu:genres:10130. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Curtis Balmer). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.