Title: | Approaches to the Bargaining Problem Before and After the Theory of Games: A Critical Discussion of Zeuthen's, Hicks', and Nash's Theories |

Author: | John C. Harsanyi |

Journal: | Econometrica |

Volume: | 24 |

Number: | 2 |

Pages: | 144--157 |

Month: | April |

Year: | 1965 |

Abstract: | It is proposed to show that Professor Zeuthen's solution of the bargaining problem (antedating the von Neumann-Morgenstern theory of games by more than a decade) is mathematically equivalent to Mr. Nash's solution (based on the theory of games), except that Zeuthen regards the two parties' mutual bargaining threats as given while Nash furnishes a solution also for the problem of selecting optimal threats. At the same time, it will be submitted that Zeuthen's approach in turn supplements Nash's more abstract treatment in an important way by supplying a plausible psychological model for the actual bargaining process. However, certain minor changes in the basic postulates of Zeuthen's theory and a simplification of Nash's method for finding the optimal threats will be suggested. Comparing Nash's theory with Professor Hick's theory of collective bargaining (publish shortly after Professor Zeuthen's), it will be arguie that the former rests on assumptions both more realistic and more consistend with the postulate of rational behaviour. Finally, the economic significance of the Zeuthen-Nash theory of bargaining will be discussed. |

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@Article{harsanyi65a, author = {John C. Harsanyi}, title = {Approaches to the Bargaining Problem Before and After the Theory of Games: A Critical Discussion of Zeuthen's, Hicks', and Nash's Theories}, journal = {Econometrica}, year = 1965, volume = 24, number = 2, pages = {144--157}, month = {April}, googleid = {eBvWWUYZP20J:scholar.google.com/}, abstract = {It is proposed to show that Professor Zeuthen's solution of the bargaining problem (antedating the von Neumann-Morgenstern theory of games by more than a decade) is mathematically equivalent to Mr. Nash's solution (based on the theory of games), except that Zeuthen regards the two parties' mutual bargaining threats as given while Nash furnishes a solution also for the problem of selecting optimal threats. At the same time, it will be submitted that Zeuthen's approach in turn supplements Nash's more abstract treatment in an important way by supplying a plausible psychological model for the actual bargaining process. However, certain minor changes in the basic postulates of Zeuthen's theory and a simplification of Nash's method for finding the optimal threats will be suggested. Comparing Nash's theory with Professor Hick's theory of collective bargaining (publish shortly after Professor Zeuthen's), it will be arguie that the former rests on assumptions both more realistic and more consistend with the postulate of rational behaviour. Finally, the economic significance of the Zeuthen-Nash theory of bargaining will be discussed.}, keywords = {economics negotiation game-theory}, url = {http://jmvidal.cse.sc.edu/library/harsanyi75a.pdf}, cluster = {7872038463612525432} }Last modified: Wed Mar 9 10:13:26 EST 2011