Judicial Precedent as a Dynamic Rationale for Axiomatic Bargaining Theory

Marc Fleurbaey and John Roemer

No 1002, IDEP Working Papers from Institut d'economie publique (IDEP), Marseille, France

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 a (infinite) sequence of two-person problems; at each date, the Judge is presented with a utility possibility set in R2+. 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 as that date. Under what conditions what 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)
Pages: 43 pages
Date: 2010-05-07, Revised 2010-05-07
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (1)

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Working Paper: Judicial Precedent as a Dynamic Rationale for Axiomatic Bargaining Theory (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:iep:wpidep:1002

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