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Nash Bargaining Solution with Coalitions and The Joint Bargaining Paradox

  • Suchan Chae
  • Paul Heidhues

We propose a solution for bargaining problems where coalitions are bargainers. The solution generalizes the Nash solution and allows one to interpret a coalition as an institutional player whose preferences are obtained by aggregating the preferences of the individual members. One implication of our solution is that forming a coalition is unprofitable in pure-bargaining situations (the joint-bargaining paradox). We show, however, that forming a coalition can be profitable in a non-pure bargaining situation. ZUSAMMENFASSUNG - (Die Nash Verhandlungslösung mit Koalitionen und Harsanyi's Verhandlungsparadox) In der vorliegenden Arbeit schlagen wir ein Lösungskonzept für Verhandlungsspiele vor, bei denen die verhandelnden Parteien aus Koalitionen von Individuen bestehen können. Unser Lösungskonzept basiert auf einer Verallgemeinerung der Nash-Verhandlungslösung. Nach unserem Lösungskonzept kann eine Koalition als ein institutioneller Spieler aufgefasst werden, dessen Präferenzordnung auf einer Aggregierung der Präferenzen seiner Mitglieder basiert. Eine Implikation unserer Verhandlungslösung ist, dass Koalitionen in "reinen Verhandlungsspielen" nicht im Interesse der Individuen sind. In "nicht reinen Verhandlungsspielen" hingegen können Koalitionen durchaus vorteilhaft seien.

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Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 01-15.

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Length: 37 pages
Date of creation: Aug 2001
Date of revision:
Publication status: Published in Mathematical Social Sciences (under the title "A Group Bargaining Solution"), 48(1), 2004, pp. 37-53.
Handle: RePEc:wzb:wzebiv:fsiv01-15
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  1. Lensberg, Terje, 1988. "Stability and the Nash solution," Journal of Economic Theory, Elsevier, vol. 45(2), pages 330-341, August.
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  13. Raymond Deneckere & Carl Davidson, 1985. "Incentives to Form Coalitions with Bertrand Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(4), pages 473-486, Winter.
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