The Nash Bargaining Solution and Interpersonal Utility Comparisons

Shiran Rachmilevitch

No WP2012/1, Working Papers from University of Haifa, Department of Economics

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.

Keywords: Bargaining; interpersonal utility comparisons; Nash solution (search for similar items in EconPapers)
JEL-codes: D63 D71 (search for similar items in EconPapers)
Pages: 13
New Economics Papers: this item is included in nep-gth, nep-hpe, nep-mic and nep-upt
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