Fairness, Efficiency, and the Nash Bargaining Solution
No WP2011/10, Working Papers from University of Haifa, Department of Economics
A bargaining solution balances fairness and efficiency if each player's payoff lies between the minimum and maximum of the payoffs assigned to him by the egalitarian and utilitarian solutions. In the 2-person bargaining problem, the Nash solution is the unique scale-invariant solution satisfying this property. Additionally, a similar result, relating the weighted egalitarian and utilitarian solutions to a weighted Nash solution, is obtained. These results are related to a theorem of Shapley, which I generalize. For n>=3, there does not exist any n-person scale-invariant bargaining solution that balances fairness and efficiency.
Keywords: Bargaining; fairness; efficiency; Nash solution (search for similar items in EconPapers)
JEL-codes: D63 D71 (search for similar items in EconPapers)
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