Solving the Bargaining Problem

Abstract

The bargainingproblem is here conceived as determining a point of final agreement in bilateral bargaining situations where there is an overlap in the interests of the parties. Several formal models for describing how persons may solve the bargaining problem (in particular, those of Nash, Kalai and Smorodinsky, and Felsenthal and Diskin) are briefly reviewed, and three experiments are described which seek a comparative test of these models. Experimental results fail to provide clear support for any of these formal models, but they do lead to a more generaldescription of how bargainers tend to arrive at cooperative agreements. This is expressed in terms of the three central considerations of (1) prominence, (2) social efficiency, and (3) equity.