Mediation and the Nash bargaining solution

Charles A. Wilson

Review of Economic Design, 2001, vol. 6, issue 3, 353-370

Abstract: This paper analyzes a model of bargaining in which two parties use a mediator who sequentially makes random proposals until agreement by both parties is reached. I show that as the cost of delay shrinks to zero, the subgame perfect payoff converges to the asymmetric Nash bargaining solution with weights determined by the relative discount rates of the players. I also establish conditions for the uniqueness of the subgame perfect equilibrium for arbitrary discount rates.

Date: 2002-04-10
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