On Risk Aversion and Bargaining Outcomes
We revisit the well known result that asserts that and increase in the degree of one's risk aversion improves the position one's opponents. for this purpose, we apply Yaari's dual theory of choice under risk both to Nash's bargaining problem and to Rubinstein's game of alternating offers. Within this theory and 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 ones degree of risk aversion, increases one's share of the pie.
|Date of creation:||06 Sep 1999|
|Date of revision:|
|Publication status:||Published in Games and Economic Behavior 41(1), 120-140, (2002)|
|Contact details of provider:|| Postal: |
Web page: http://volij.co.il/
|Order Information:||Web: http://volij.co.il/addr.html|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Nir Dagan & Oscar Volij & Eyal Winter, 2001.
"The Time-Preference Nash Solution,"
Discussion Paper Series
dp265, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
- 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 101-24, March.
- Murnigham, J.K. & Roth, A.E. & Schoumaker, F., 1985. "Risk Aversion in Bargaining: an Experimental Study," Cahiers de recherche 8536, Universite de Montreal, Departement de sciences economiques.
- Volij, Oscar, 2002.
"Payoff Equivalence in Sealed Bid Auctions and the Dual Theory of Choice Under Risk,"
Staff General Research Papers
10129, Iowa State University, Department of Economics.
- 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.
- 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.
- Oscar Volij, 1999. "Utility Equivalence in Sealed Bid Auctions and the Duel Theory of Choice Under Risk," Working Papers 99-8, Brown University, Department of Economics.
- Kannai, Yakar, 1977. "Concavifiability and constructions of concave utility functions," Journal of Mathematical Economics, Elsevier, vol. 4(1), pages 1-56, March.
- Yaari, Menahem E, 1987. "The Dual Theory of Choice under Risk," Econometrica, Econometric Society, vol. 55(1), pages 95-115, January.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Martin J. Osborne & Ariel Rubinstein, 1994.
"A Course in Game Theory,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 0262650401, June.
- Hadar, Josef & Seo, Tae Kun, 1995. "Asset diversification in Yaari's dual theory," European Economic Review, Elsevier, vol. 39(6), pages 1171-1180, June.
- Ariel Rubinstein, 2010.
"Perfect Equilibrium in a Bargaining Model,"
Levine's Working Paper Archive
252, David K. Levine.
- 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 961-65, July.
- Roth, Alvin E, 1985. "A Note on Risk Aversion in a Perfect Equilibrium Model of Bargaining," Econometrica, Econometric Society, vol. 53(1), pages 207-11, January.
- Fanny Demers & Michel Demers, 1989.
"Price Uncertainty, The Competitive Firm and the Dual Theory of Choice Under Risk,"
Carleton Industrial Organization Research Unit (CIORU)
89-09, Carleton University, Department of Economics.
- 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.
- 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.
- Safra Zvi & Zilcha Itzhak, 1993.
"Bargaining Solutions without the Expected Utility Hypothesis,"
Games and Economic Behavior,
Elsevier, vol. 5(2), pages 288-306, April.
- Zilcha & I. & Safra, Z., 1990. "Bargaining Solutions Without The Expected Utility Hypothesis," Papers 33-90, Tel Aviv.
- Sobel, Joel, 1981. "Distortion of Utilities and the Bargaining Problem," Econometrica, Econometric Society, vol. 49(3), pages 597-619, May.
- 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 353-65, December.
- Thomson, William, 1988. "The Manipulability of the Shapley-Value," International Journal of Game Theory, Springer, vol. 17(2), pages 101-27.
- 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 639-47, May.
When requesting a correction, please mention this item's handle: RePEc:nid:ovolij:010. 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: (Oscar Volij)
If references are entirely missing, you can add them using this form.