Randomized dictatorship and the Kalai–Smorodinsky bargaining solution
Theory and Decision, 2014, vol. 76, issue 2, 173-177
“Randomized dictatorship,” one of the simplest ways to solve bargaining situations, works as follows: a fair coin toss determines the “dictator”—the player to be given his first-best payoff. The two major bargaining solutions, that of Nash (Econometrica 18:155–162, 1950 ) and that of Kalai and Smorodinsky (Econometrica, 43:513–518, 1975 ), Pareto-dominate this process (in the ex ante sense). However, whereas the existing literature offers axiomatizations of the Nash solution in which this ex ante domination plays a central role (Moulin, Le choix social utilitariste, Ecole Polytechnique Discussion Paper, 1983 ; de Clippel, Social Choice and Welfare, 29:201–210, 2007 ), it does not provide an analogous result for Kalai–Smorodinsky. This paper fills in this gap: a characterization of the latter is obtained by combining the aforementioned domination with three additional axioms: Pareto optimality, individual monotonicity, and a weakened version of the Perles–Maschler (International Journal of Game Theory, 10:163–193, 1981 ) super additivity axiom. Copyright Springer Science+Business Media New York 2014
Keywords: Bargaining; Kalai–Smorodinsky solution; Randomized dictatorship (search for similar items in EconPapers)
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