How to Add Apples and Pears: Non-Symmetric Nash Bargaining and the Generalized Joint Surplus

Samuel Danthine and Noemí Navarro
Economics Bulletin Vol. 33 No. 4 pp. 2840-2850

We find how to compute the non-symmetric Nash bargaining solution by means of a generalized property of linear division of the joint surplus, as an alternative of solving the maximization of the generalized Nash product. This generalized property of linear division in the non-symmetric Nash bargaining solution can be applied to the case when bargainers use different utility scales, in particular when they have different attitudes toward risk, as is the case of a risk neutral firm and a risk averse individual. The surplus each agent receives has to be expressed in compatible, or comparable, units across agents. This is contraty to what has been believed in the labor literature, where many authors have partially expressed surpluses in comparable units. We finally illustrate the conditions of applicability of our result by means of a well-known example.

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