Bayesian Non-Cooperative Foundations for Axiomatic Bargaining Theories

Yaacov Z. Bergman

In the first part, Rubinstein's two-person, complete information, alternating-offers bargaining model is extended to that of a fairly general contested pie which accommodates non-stationary preferences and physical joint payoffs with non-stationary constraints and outside options. The generalization in discrete-time and its continuous-time limit as bargaining rounds shorten are designed to bring the non-cooperative alternating-offers bargaining model to a form whose predictions can be compared and contrasted with those of the various axiomatic bargaining theories. This is done in the second part, where a bayesian approach is developed, which is used to optimally predict bargaining outcomes in game situations where full information about the bargaining procedure is lacking. This methodology gives rise to bayesian bargaining solution-functions, that generalize axiomatic bargaining solution-functions, thus setting the axiomatic theories on non-cooperative foundations.

September, 1992
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