Bargaining and Destructive Power

The theory of bargaining as formulated by Nash (1950, 1953) has developed along two routes. One is axiomatic (e.g., Nash 1950; Kalai and Smorodinsky 1975; Roemer 1988). Here, the negotiation process underlying the bargaining is only implicit. The idea is to try to characterize the negotiated outcome (the solution) through a set of axioms without formally modeling the process. The advantages of the axiomatic route are clear enough. A fruitful solution concept will be applicable to a wide class of negotiation procedures. Partly for this reason the axiomatic approach has been adopted not only in the classical bargaining problem but more generally in cooperative game theory, where axiomatizations have been devised for such solution concepts as the Shapley value and the nucleolus. The second route formulates the problem of bargaining in strategic terms. Here, the negotiation procedure is described explicitly as a noncooperative game, and its equilibrium points are studied (see, e.g., Nash 1953). This