Bargaining Theory

Bargaining theory is the branch of game theory dealing with the analysis of bargaining problems, in which some parties bargain over the division of certain goods. A solution to a bargaining problem means the determination of such a division. Examples of simple as well as more complex applications of bargaining theory to economic, political and social situations abound. Essentially, one may apply an axiomatic approach to bargaining problems, i.e., postulate some axioms concerning a potential solution, and then investigate its existence and properties resulting from the adopted axioms. One may also apply a different approach to bargaining problems, called the dynamic or strategic approach, which involves the representation of a bargain as a non-cooperative game and the investigation of solutions from among the equilibria of the game.