INSTITUTE OF MATHEMATICAL ECONOMICS

Elisabeth Naeve-Steinweg

Working-Paper No. 277

October 1997

Abstract

In two-person meta-bargaining theory we consider two-person bargaining games and we assume that the agents want to apply two different bargaining solutions. A mechanism is a function which assigns to every meta-bargaining game an allocation depending on the two bargaining solutions supported by the agents. We define a mechanism which can be justified by the rationale of the underlying step-by-step bargaining procedure and list some properties which are only satisfied by our mechanism. For every bargaining game we define a correponding non-cooperative game in which agents can choose bargaining solutions as strategies and the outcome is determined by the mechanism. We show that each agent has a unique dominant strategy, namely his respective dictatorial solution. The function which assigns to every bargaining game the equilibirium outcome of the corresponding non-cooperative game is the discrete Raiffa solution. Hence, we give a non-cooperative foundation of the discrete Raiffa solution.

Keywords: Meta-bargaining, Step-by-step bargaining, Mechanism, Raiffa solution, Non-cooperative foundations