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Nashs Bargaining Formula Revisited: A Note on Self-Referential Logic

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  • James Gander

Abstract

The note focuses on the marginal rates of substitution (MRS) in Nashs product formula solution to bargaining and why the formula works. Two simple examples from duopoly and bilateral monopoly are used to demonstrate that the MRSs for both players are implicitly in the contract curve and the product formula. They are equal in the former by design. They become equal in the latter in equilibrium. The self-referential logic is evident. The bargaining model or system is self-contained and circular and is analogous to the proposition given by x = F(x).

Suggested Citation

  • James Gander, 2008. "Nashs Bargaining Formula Revisited: A Note on Self-Referential Logic," Working Paper Series, Department of Economics, University of Utah 2008_10, University of Utah, Department of Economics.
    • Handle: RePEc:uta:papers:2008_10
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    File URL: http://economics.utah.edu/research/publications/2008_10.pdf
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    More about this item

    Keywords

    Bargaining; Pareto Optimum; Self-Referential Logic;
    All these keywords.

    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
    • C65 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Miscellaneous Mathematical Tools

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