Bilateral Bargaining: Theory and Applications

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Springer Science & Business Media, Apr 10, 2002 - Business & Economics - 188 pages
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This book investigates bargaining between two agents. Its objective is to present, to extend, and to apply the present state of theoretical knowledge. A wide range of questions will be considered: First of all, will two parties reach efficient agreements? Traditional economic theory gives a generally affirma tive answer for perfectly rational agents, who can carry out complex calcu lations instantaneously and without cost. The book uses innovative methods to analyse the implications of less demanding assumptions. A practical ques tion related to bargaining is: How much power does the design of institutions such as the U. N. Security Council give to each of its members? Formally, non permanent members' votes are necessary to pass resolutions, but theoretical investigation of pre-voting negotiation attributes all power to the five perma nent members. Or one may ask whether a society should rather finance the education in higher mathematics for a talented person than remedial training for a retarded person? Different concepts of justice yield different answers. Which particular concept is implemented in a given society is also a matter of bargaining, and it is of special philosophical interest to investigate which bargain will be struck in an ideal society in which individual talents and resources are not yet known. Very generally, a bilateral bargaining situation is characterized by two agents - individuals, firms, governments, etc.
 

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Contents

1 Essentials of Bargaining Theory
5
11 Early Formalizations and Models
6
12 Cooperative Solutions
10
121 The Nash Bargaining Solution
11
122 Alternative Solutions
22
13 Noncooperative Models
25
131 Games with Finite Horizon
26
132 Rubinsteins Alternating Offers Model
30
26 Proofs
98
3 Bilateral Bargaining and Decision Power
109
31 Power Indices
110
32 Inferior Players
115
33 The Strict Power Index SPI
117
34 Inferior Players in a Probabilistic Setting
121
35 Concluding Remarks
123
4 Bargaining and Justice
127

133 Strategic Bargaining with Incomplete Information
44
14 Evolutionary Models
49
141 Adaptive Play
51
142 Replicator Dynamics and the Ultimatum Minigame
60
143 Bargaining Automata
67
15 Empirical Evidence and Discussion
73
2 Aspirationbased Bargaining
81
21 Related Literature
82
22 The Model
84
23 Theoretical Results
88
24 Simulation Results
91
25 Concluding Remarks
96
41 Bargaining Solutions and Principles of Social Justice
128
412 KalaiSmorodinsky Bargaining Solution
131
413 Egalitarian and Utilitarian Bargaining Solutions
132
42 Rawlss Theory of Justice
135
43 Binmores Theory of the Social Contract
138
44 Discussion
147
Gametheoretic Concepts Notation and Results
153
List of Symbols
165
List of Figures
169
References
171
Index
185
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