Strategic Behavior and the Environment > Vol 2 > Issue 3

Bargaining with Linked Disagreement Points

Justin Leroux, HEC Montréal, CIRANO and CIRPÉE, Canada, Walid Marrouch, Lebanese American University, School of Business, Department of Economics and CIRANO, Lebanon,
Suggested Citation
Justin Leroux and Walid Marrouch (2012), "Bargaining with Linked Disagreement Points", Strategic Behavior and the Environment: Vol. 2: No. 3, pp 259-277.

Published: 18 Sep 2012
© 2012 J. Leroux and W. Marrouch
Group Choice and Negotiation/Bargaining
Axiomatic bargainingMultiple issuesIssue linkageDisagreement points

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In this article:
Related Literature
The Model
Relaxing the Axioms
Concluding Remarks


In the context of bilateral bargaining, we deal with issue linkage by developing a two-issue cooperative bargaining model. In contrast to the traditional Nash bargaining literature, the axioms we propose focus on the role of the disagreement points. We characterize a new solution that we call the Linked Disagreement Points (LDP) solution, which explicitly links the players' bargaining powers on each issue. We then weaken our axioms in turn, and a family of bargaining rules stands out: the Equal Net Ratio Solutions. These solutions point to Pareto-efficient outcomes such that the relative gains for players are equal across issues. We discuss our results in light of international trade and environmental negotiations, which are often put on the bargaining table in a linked fashion.