Randomized dictatorship and the Kalai-Smorodinsky bargaining solution

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Abstract

"Randomized dictatorship," one of the simplest ways to solve bargaining situations, works as follows: a fair coin toss determines the "dictator" - the player to be given his first-best payoff. The two major bargaining solutions, that of Nash (Econometrica 18:155-162, 1950) and that of Kalai and Smorodinsky (Econometrica, 43:513-518, 1975), Pareto-dominate this process (in the ex ante sense). However, whereas the existing literature offers axiomatizations of the Nash solution in which this ex ante domination plays a central role (Moulin, Le choix social utilitariste, Ecole Polytechnique Discussion Paper, 1983; de Clippel, Social Choice and Welfare, 29:201-210, 2007), it does not provide an analogous result for Kalai-Smorodinsky. This paper fills in this gap: a characterization of the latter is obtained by combining the aforementioned domination with three additional axioms: Pareto optimality, individual monotonicity, and a weakened version of the Perles-Maschler (International Journal of Game Theory, 10:163-193, 1981) super additivity axiom.

Original languageEnglish
Pages (from-to)173-177
Number of pages5
JournalTheory and Decision
Volume76
Issue number2
DOIs
StatePublished - Feb 2014

Keywords

  • Bargaining
  • Kalai-Smorodinsky solution
  • Randomized dictatorship

ASJC Scopus subject areas

  • General Decision Sciences
  • Developmental and Educational Psychology
  • Arts and Humanities (miscellaneous)
  • Applied Psychology
  • General Social Sciences
  • Economics, Econometrics and Finance (all)
  • Computer Science Applications

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