Econometrica: Oct, 1965, Volume 33, Issue 4

Zeuthen's Theory of Bargaining: A Note

https://doi.org/0012-9682(196510)33:4<802:ZTOBAN>2.0.CO;2-#
p. 802-813

Edward Saraydar

Zeuthen's multi-round solution to the bilateral monopoly problem is demonstrably restricted to bargainers who, at each round, almost perversely ignore the preceding succession of modified offers, and persist in a consideration of outcomes limited to total capitulation. Alternatively, the Zeuthen solution is a single-round solution. A Zeuthen-type model is developed and utilized to show that, whether single- or multi-round, the wage outcome is confined to a range delimited by those rates which maximize the expected gain from no-concession for each bargainer.