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Risk aversion and the relationship between Nash's solution and subgame perfect equilibrium of sequential bargaining

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Abstract

This article presents some new, intuitive derivations of several results in the bargaining literature. These new derivations clarify the relationships among these results and allow them to be understood in a unified way. These results concern the way in which the risk posture of the bargainers affects the outcome of bargaining as predicted by Nash's (axiomatic) solution of a static bargaining model (Nash, 1950) and by the subgame perfect equilibrium of the infinite horizon sequential bargaining game analyzed by Rubinstein (1982). The analogous, experimentally testable predictions for finite horizon sequential bargaining games are also presented.

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Authors and Affiliations

  1. Department of Economics, University of Pittsburgh, 15260, Pittsburgh, PA

    Alvin E. Roth

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  1. Alvin E. Roth
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Additional information

This work has been partially supported by a grant from the Russell Sage Foundation. I have also received helpful comments from Ken Binmore, Ariel Rubinstein, Asher Wolinsky, and (especially) Shmuel Zamir.

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Roth, A.E. Risk aversion and the relationship between Nash's solution and subgame perfect equilibrium of sequential bargaining. Journal of Risk and Uncertainty 2, 353–365 (1989). https://doi.org/10.1007/BF00356861

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  • DOI: https://doi.org/10.1007/BF00356861

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