Bargaining refers to a situation in which two or more persons (players) are confronted with a set of feasible outcomes of which one will be realized if and only if an unanimous agreement on this outcome is reached. In case that no unanimous agreement is reached, a conflict or disagreement outcome will be the result. For the purposes of this thesis it is sufficient to consider bargaining models with two players. A simple example for such a bargaining situation is how to divide a dollar between two players. Suppose that two players are offered a dollar in case they can reach an agreement how to divide it. If they are not able to reach such an agreement, no player gets anything. This problem can be found quite often in reality, for example, if cost savings are possible but can only be gained by means of mutual cooperation. This section will introduce various solutions to bargaining games that satisfy ‘reasonable’ conditions — axioms. The axioms represent desirable properties a bargaining outcome should possess (Sandholm (1999)). Accordingly, the solutions are called axiomatic bargaining solutions.
KeywordsNash Equilibrium Bargaining Solution Bargaining Game Bidding Strategy Combinatorial Auction
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