Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/150156
Authors: 
Fleurbaey, Marc
Roemer, John E.
Year of Publication: 
2011
Citation: 
[Journal:] Theoretical Economics [ISSN:] 1555-7561 [Volume:] 6 [Year:] 2011 [Issue:] 2 [Pages:] 289-310
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 an (infinite) sequence of two-person problems; at each date, the Judge is presented with a utility possibility set in the nonnegative orthant in two-dimensional Euclidean space. 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 at that date. Under what conditions will 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.
Subjects: 
Axiomatic bargaining theory
judicial precedent
dynamic foundations
Nash's bargaining solution
JEL: 
C70
C78
K4
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by-nc/3.0/
Document Type: 
Article

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