Consider a model of bargaining, in which two players, 1 and 2, share a pie of size y. The bargaining environment is described by a set of parameters ? that may affect agents' preferences over the agreement sharing, the status quo outcome, or both. The outcomes (i.e., whether an agreement is reached, and if so the individual shares) and the environment (including the size of the pie) are known, but neither the agents' utilities nor their threat points. Assuming that the agents adopt a Nash bargaining solution, we investigate the empirical content of this assumption. We first show that in the most general framework, any outcome can be rationalized as a Nash solution. However, if (i) the size of the pie y does not influence the players' threat points and (ii) there exist (at least) two parameters ?1 and ?2 that are player-specific, in the sense that ?i does not influence the utility or the threat point of player j ? i, then Nash bargaining generates strong testable restrictions. Moreover, the underlying structure of the bargaining, i.e., the players' utility and threat point functions, can be recovered under slightly more demanding conditions.
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Find related papers by JEL classification: C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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McElroy, Marjorie B & Horney, Mary Jean, 1990.
"Nash-Bargained Household Decisions: Reply,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 31(1), pages 237-42, February.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
Arianna Degan & Antonio Merlo, 2007.
"Do Voters Vote Sincerely?,"
NBER Working Papers
12922, National Bureau of Economic Research, Inc.
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Arianna Degan & Antonio Merlo, 2006.
"Do Voters Vote Sincerely?,"
PIER Working Paper Archive
06-008, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
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