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Competitive equilibrium as a bargaining solution: An axiomatic approach

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  • 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.

Suggested Citation

  • Alon, Shiri & Lehrer, Ehud, 2019. "Competitive equilibrium as a bargaining solution: An axiomatic approach," Games and Economic Behavior, Elsevier, vol. 118(C), pages 60-71.
    • Handle: RePEc:eee:gamebe:v:118:y:2019:i:c:p:60-71
    DOI: 10.1016/j.geb.2019.08.006
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    Cited by:

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    3. Muna Adilah & Hsin Rau & Katrina Mae Procopio, 2023. "Using an Axiomatic Design Approach to Develop a Product Innovation Process with Circular and Smart Design Aspects," Sustainability, MDPI, vol. 15(3), pages 1-24, January.

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    More about this item

    Keywords

    Bargaining; Exchange economy; Ordinal bargaining solution; Competitive equilibrium;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models

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