Noncooperative models for bargaining solutions

Abstract

Axiomatic bargaining theory started with Nash’s seminal paper “The Bargaining Problem”, which appeared in 1950. This paper is still the most important paper in the field; it introduces and axiomatically characterizes the Nash bargaining solution. In his 1951 paper, Nash proposes his equilibrium concept for noncooperative games. Also this contribution to game theory is pathbreaking. Nash’s 1953 paper on bargaining tries to combine both the cooperative and the noncooperative approach. Nash designs a noncooperative demand game of which the, in a certain sense unique, Nash equilibrium leads to the payoffs prescribed by the Nash bargaining solution. Although the argument laid out in the last paper is formally incomplete and somewhat ad hoc, it has plotted a course for what some authors have termed the Nash program (Binmore and Dasgupta, 1987). This “program” aims at constructing bargaining procedures that have an axiomatic as well as a noncooperative justification. See also the quotation from Nash (1953) in section 9.3.