INSTITUTE OF MATHEMATICAL ECONOMICS

Jörg Naeve

Working-Paper No. 276

September 1997

Abstract

Some authors present models in which they show that the Nash bargaining solution fails to be Maskin monotonic and hence cannot be implemented in Nash equilibrium. We find these results misleading and discuss how implementability of the Nash bargaining solution can be discussed in utility space. Arguing that the status quo should be treated as initial endowments we keep it fixed and show that with this assumption the Nash bargaining solution satisfies Maskin monotonicity. The key property used in the proof is independence of irrelevant alternatives which also turns out to be a necessary condition for implementability. We also show that the Nash bargaining solution satisfies a sufficient condition for implementability independent of the number of agents.

Keywords: Nash Bargaining, Implementation, IIA, Maskin Monotonicity