Economics at your fingertips  

Divide the dollar and conquer more: sequential bargaining and risk aversion

Philip Grech () and Oriol Tejada ()
Additional contact information
Philip Grech: Chair of Negotiation and Conflict Management at ETH Zurich
Oriol Tejada: CER-ETH-Center of Economic Research at ETH Zurich

International Journal of Game Theory, 2018, vol. 47, issue 4, 1261-1286

Abstract: Abstract We analyze the problem of dividing a fixed amount of a single commodity between two players on the basis of the Nash bargaining solution (NBS). For one-shot negotiations, a cornerstone result of Roth (Axiomatic models of bargaining. Springer, Berlin, 1979) establishes that the more risk averse player will obtain less than half the total amount. In the present paper, we assume that the bargaining procedure occurs over several rounds. In each round, an increasing share of the total amount is negotiated over in accordance with the NBS, the disagreement point being determined by the outcome of the previous round. In line with Roth’s result, the final amount received by the more risk averse player is still bounded by half the total amount. As a new feature, however, this player does not lose from bargaining for more rounds if his opponent exhibits non-increasing absolute risk aversion. What is more, both players’ risk profiles become essentially irrelevant if successive bargaining takes place over sufficiently small commodity increments. Each player then gets approximately half of the commodity.

Keywords: Bargaining; Nash bargaining solution; Risk aversion; Sequential procedure (search for similar items in EconPapers)
JEL-codes: C70 C78 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/182/PS2

Access Statistics for this article

International Journal of Game Theory is currently edited by Shmuel Zamir, Vijay Krishna and Bernhard von Stengel

More articles in International Journal of Game Theory from Springer, Game Theory Society
Bibliographic data for series maintained by Sonal Shukla ().

Page updated 2019-11-06
Handle: RePEc:spr:jogath:v:47:y:2018:i:4:d:10.1007_s00182-018-0618-x