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Relevant Irrelevance: The Relevance of Independence of Irrelevant Alternatives in Family Bargaining

In: Individual and Collective Choice and Social Welfare

Author

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  • Elisabeth Gugl

    (University of Victoria)

Abstract

Introducing production to a family bargaining model immediately sets the stage for the axiom of Independence of Irrelevant Alternative (IIA). Requiring that bargaining solutions satisfy IIA rules out the Kalai-Smorodinsky solution, but the broad class of Generalized Utilitarian bargaining solutions satisfies this axiom. I show that In the case of utility profiles that lead to almost transferable utility, IIA has no bite because the utility possibility frontier before and after production coincide. Almost TU is an important subdomain of all utility profiles and much broader than transferable utility, but it is still restrictive. Hence IIA is a desirable axiom of family bargaining solutions. I focus on bargaining within the family but the argument for IIA as a relevant property of bargaining solutions applies to other bargaining problems as well in which goods are produced or second period renegotiation takes place.

Suggested Citation

  • Elisabeth Gugl, 2015. "Relevant Irrelevance: The Relevance of Independence of Irrelevant Alternatives in Family Bargaining," Studies in Choice and Welfare, in: Constanze Binder & Giulio Codognato & Miriam Teschl & Yongsheng Xu (ed.), Individual and Collective Choice and Social Welfare, edition 127, pages 213-223, Springer.
    • Handle: RePEc:spr:stcchp:978-3-662-46439-7_13
    DOI: 10.1007/978-3-662-46439-7_13
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