On the Ranking of Bilateral Bargaining Opponents

Maria Gallego

Working Papers from Wilfrid Laurier University, Department of Economics

Abstract: We fix the status quo (Q) and one of the bilateral bargaining agents to examine how shifting the opponent.s ideal point (type) away from Q in a unidimensional space affects the Nash and Kalai-Smorodinsky bargaining solutions when opponents differ only in their ideal points. The results are similar for both solutions. As anticipated, the bargainer whose ideal point is farthest from Q prefers a opponent whose ideal is closest to her own. A similar intuitive ranking emerges for the player closest to Q when opponent\'s preferences exhibit increasing absolute risk aversion. However, if the opponent\'s preferences exhibit decreasing absolute risk aversion (DARA), the player closest to Q prefers a more extreme opponent. This unintuitive result arises for opponents with DARA preferences because the farther their ideal point is from Q, the easier they are to satisfy.

Keywords: Game Theory; Nash bargaining problems; bargaining solutions, rankings (search for similar items in EconPapers)
JEL-codes: C7 C71 C78 (search for similar items in EconPapers)
Pages: 37
Date: 2005, Revised 2005
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: On the ranking of bilateral bargaining opponents (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:wlu:wpaper:eg0043

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