Nash bargaining solution under predonation and collusion in a duopoly

Date

1998

Author

Sertel, Murat R.
Zeki Orbay, Benan

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In this paper, the manipulability of the Nash bargaining solution through predonationis investigated focusing on the two-person bargaining problems with triangularbargaining sets and arbitrary threat points. When pre-donation is given from total payoffsand the greater ideal payoff is high enough, then the lucky bargainer (the bargainer withthe greater ideal payoff) has an incentive to make a donation to her opponent and, as longas her threat payoff is different from zero, both bargainers obtain higher payoffs comparedto the outcome without pre-donation. When pre-donation is given from the excess of thethreat payoffs, there is always an incentive for pre-donation, however, only the luckybargainer gains from pre-donation. For the duopolistic collusion problem, the efficientfirm (with lower marginal cost) has an incentive to give a share of itsprofit to its rival only if the share is given from its excess threat profit under all Cournot

URI

https://hdl.handle.net/11511/110070

Collections

Department of Economics, Article