The Nash bargaining solution is optimal (Q1104875)

The author studies the classical two-person bargaining game. The set F consists of all bargaining solutions that satisfy the following known axioms: Pareto optimality, scale invariance, symmetry and risk sensitivity. It is proved that for any bargaining game S the set \(\{\) f(S): \(f\in S\}\) is closed and connected. A meta bargaining game \(\Gamma\) (S) is defined, where \(S_ 1=S\) and the set \(S_{t+1}\) consists of all those payoff vectors for which the ith coordinate does not exceed the demand of player i in stage t. This game has many interesting properties. It is also proved that only the Nash solution is an equilibrium for every bargaining game S, and that the ``independence of irrelevant alternative'' axiom can be replaced by a much weaker recursivity axiom.