2002 Reports

Subgame-perfect implementation of bargaining solutions

Miyagawa, Eiichi

This paper provides simple four-stage game forms that fully implement a large class of two-person bargaining solutions in subgame-perfect equilibrium. The solutions that can be implemented by our game forms are those that maximize a monotonic and quasi-concave function of utilities after normalizing each agent's utility function so that the maximum utility is 1 and the utility of the disagreement outcome is 0. This class of solutions includes the Nash, Kalai, Smorodinsky, and Relative Utilitarian solutions. The game forms have a structure of alternating offers and contain no integer device.