Simultaneous Nash Bargaining with Consistent Beliefs
Roberto Burguet and
Ramon Caminal ()
UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)
We propose and analyze a new solution concept, the R solution, for three-person, transferable utility, cooperative games. In the spirit of the Nash Bargaining Solution, our concept is founded on the predicted outcomes of simultaneous, two-party negotiations that would be the alternative to the grand coalition. These possibly probabilistic predictions are based on consistent beliefs. We analyze the properties of the R solution and compare it with the Shapley value and other concepts. The R solution exists and is unique. It belongs to the bargaining set and to the core whenever the latter is not empty. In fact, when the grand coalition can simply execute one of the three possible bilateral trades, the R solution is the most egalitarian selection of the bargaining set. Finally, we discuss how the R solution changes important conclusions of several well known Industrial Organization models.
Keywords: cooperative games; bargaining; endogenous fall-back options; consistent beliefs; R solution. (search for similar items in EconPapers)
JEL-codes: C71 C78 L14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm and nep-gth
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Working Paper: Simultaneous Nash Bargaining with Consistent Beliefs (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:aub:autbar:854.10
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