Econometrica: May, 2019, Volume 87, Issue 3

The Probability to Reach an Agreement as a Foundation for Axiomatic Bargaining

https://doi.org/10.3982/ECTA13673
p. 837-865

Lorenzo Bastianello, Marco LiCalzi

We revisit the Nash bargaining model and axiomatize a procedural solution that maximizes the probability of successful bargaining. Our characterization spans several known solution concepts, including the special cases of the Nash, egalitarian, and utilitarian solutions. Using a probability‐based language, we offer a natural interpretation for the product operator underlying the Nash solution: when the bargainers' individual acceptance probabilities are independent, their product recovers the joint acceptance probability.