Competitive equilibrium as a bargaining solution: An axiomatic approach

Alon, Shiri; Lehrer, Ehud

Abstract

The paper introduces an axiomatic characterization of a solution to bargaining problems. Bargaining problems are specified by: (a) the preference relations of the bargaining parties (b) resources that are the subject of bargaining, and (c) a pre-specified disagreement bundle for each party that would result if bargaining fails. The approach is ordinal in that parties' preferences are over bundles of goods and do not imply any risk attitudes. The resulting solution is accordingly independent of the specific utilities chosen to represent parties' preferences. We propose axioms that characterize a solution matching each bargaining problem with an exchange economy, and assigning the set of equilibrium allocations corresponding to one equilibrium price vector of that economy. The axioms describe a solution that results from an impartial arbitration process, expressing the view that arbitration is a natural method to settle disputes in which agents have conflicting interests, but can all gain from compromise.

Citation

Alon, S., & Lehrer, E. (2019). Competitive equilibrium as a bargaining solution: An axiomatic approach. Games and Economic Behavior, 118, 60-71. https://doi.org/10.1016/j.geb.2019.08.006

• Journal Article Type: Article
• Online Publication Date: Aug 30, 2019
• Publication Date: 2019-11
• Deposit Date: Aug 16, 2023
• Journal: Games and Economic Behavior
• Print ISSN: 0899-8256
• Electronic ISSN: 1090-2473
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 118
• Pages: 60-71
• DOI: https://doi.org/10.1016/j.geb.2019.08.006
• Keywords: Economics and Econometrics; Finance
• Public URL: https://durham-repository.worktribe.com/output/1719691