INSTITUTE OF MATHEMATICAL ECONOMICS

Matthias G. Raith, Andreas Welzel

Working-Paper No. 295

February 1998

Abstract

In this paper, we show that the procedure ``Adjusted Winner,'' introduced by Brams and Taylor (1996), implements the Kalai-Smorodinsky bargaining solution for a specific class of fair-division problems. By acknowledging this relationship, we generalize the algorithm in order to address a wider spectrum of bargaining problems. We are not only able to loosen the restriction on parties' preferences, but can also consider the effect of outside options on fair distributions. Moreover, we show that Adjusted Winner can easily be modified to implement alternative solutions, such as the Nash bargaining solution. Our approach combines formal reasoning with plausible argumentation, which is essential for the acceptance of theoretical solution concepts in real-life negotiations.

Keywords: Fair Division, Adjusted Winner, Kalai-Smorodinsky Solution