Judicial precedent as a dynamic rationale for axiomatic bargaining theory

, () and , E. ()
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,: CNRS and Université Paris Descartes
, E.: Departments of Political Science and Economics, Yale University
Authors registered in the RePEc Author Service: John Roemer and Marc Fleurbaey

Theoretical Economics, 2011, vol. 6, issue 2

Abstract: Axiomatic bargaining theory (e.g., Nash's theorem) is static. We attempt to provide a dynamic justification for the theory. Suppose a Judge or Arbitrator must allocate utility in an (infinite) sequence of two-person problems; at each date, the Judge is presented with a utility possibility set in the nonnegative orthant in two-dimensional Euclidean space. He/she must choose an allocation in the set, constrained only by Nash's axioms, in the sense that a penalty is paid if and only if a utility allocation is chosen at date T which is inconsistent, according to one of the axioms, with a utility allocation chosen at some earlier date. Penalties are discounted with t, and the Judge chooses any allocation, at a given date, that minimizes the penalty he/she pays at that date. Under what conditions will the Judge's chosen allocations converge to the Nash allocation over time? We answer this question for three canonical axiomatic bargaining solutions: Nash's, Kalai-Smorodinsky's, and the 'egalitarian' solution, and generalize the analysis to a broad class of axiomatic models.

Keywords: Axiomatic bargaining theory; judicial precedent; dynamic foundations; Nash's bargaining solution (search for similar items in EconPapers)
JEL-codes: C70 C78 K4 (search for similar items in EconPapers)
Date: 2011-05-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Judicial Precedent as a Dynamic Rationale for Axiomatic Bargaining Theory (2010)
Working Paper: Judicial Precedent as a Dynamic Rationale for Axiomatic Bargaining Theory (2010)
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