Competitive equilibrium as a bargaining solution: An axiomatic approach

Shiri Alon; Ehud Lehrer

doi:10.1016/j.geb.2019.08.006

Competitive equilibrium as a bargaining solution: An axiomatic approach

Shiri Alon, Ehud Lehrer

Department of Economics

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

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.

Original language	English
Pages (from-to)	60-71
Number of pages	12
Journal	Games and Economic Behavior
Volume	118
DOIs	https://doi.org/10.1016/j.geb.2019.08.006
State	Published - Nov 2019

Bibliographical note

Publisher Copyright:
© 2019 Elsevier Inc.

Funding

The authors thank Gabi Gayer, Itzhak Gilboa and David Schmeidler for their helpful comments, and the participants of the D-TEA Workshop in Paris, 2014, for their useful feedback. Shiri Alon thanks the Israel Science Foundation, grant number 1188/14, Ehud Lehrer acknowledges partial financial support of the Israel Science Foundation, grant number 963/15, and both authors thank the Pinhas Sapir Center for Economic Development at Tel Aviv University for financial support. Part of this research was done while the first author was visiting the Department of Economics at the University of Washington. The author is grateful to the department for its hospitality.

Funders	Funder number
University of Washington
Israel Science Foundation	963/15, 1188/14
Tel Aviv University

Keywords

Bargaining
Competitive equilibrium
Exchange economy
Ordinal bargaining solution

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10.1016/j.geb.2019.08.006

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Competitive equilibrium as a bargaining solution: An axiomatic approach

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Keywords

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