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Simultaneous Nash Bargaining with Consistent Beliefs

Roberto Burguet and Ramon Caminal
Authors registered in the RePEc Author Service: Ramon Caminal () and Roberto Burguet

No 521, Working Papers from Barcelona Graduate School of Economics

Abstract: We propose and analyze a new solution concept, theR-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 theR-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 theR-solution changes important conclusions of several well known Industrial Organization models.

Keywords: cooperative games; Bargaining; endogenous fallback options; consistent beliefs; R-solution (search for similar items in EconPapers)
JEL-codes: C71 C78 L14 (search for similar items in EconPapers)
Date: 2010-11
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