A Characterization of the Nash Bargaining Solution

We characterize the Nash bargaining solution replacing the axiom of Independence of Irrelevant Alternatives with three independent axioms: Independence of Non-Individually Rational Alternatives, Twisting and Disagreement Point Convexity. We give a non-cooperative bargaining interpretation to this last axiom.bargaining problem; Nash solution; axiomatic characterization; Independence of Non-Individually Rational Alternatives; Twisting; Disagreement Point Convexity

Axiomatic Bargaining on Economic Enviornments with Lott

Most contributions in axiomatic bargaining are phrased in the space of utilities. This comes in sharp contrast with standards in most other fields of economic theory. The present paper shows how Nash’s original axiomatic system can be rephrased in a natural class of economic environments with lotteries, and how his uniqueness result can be recovered, provided one completes the system with a property of independence with respect to preferences over unfeasible alternatives. Similar results can be derived for the Kalai-Smorodinsky solution if and only if bargaining may involve multiple goods. The paper also introduces a distinction between welfarism and cardinal welfarism, and emphasizes that the Nash solution is ordinally invariant on the class of von Neumann-Morgensterm preferences.Bargaining; Welfarism; Nash; Kalai-Smorodinsky; Expected Utility

Limit Solutions for Finite Horizon Bargaining Problems

We investigate a random proposer bargaining game with a dead line. A bounded time interval is divided into bargaining periods of equal length and we study the limit of the subgame perfect equilibrium outcome as the number of bargaining periods goes to infinity while the dead line is kept fixed. This limit is close to the Raiffa solution when the time horizon is very short. If the dead line goes to infinity the limit outcome converges to the time preference Nash solution. The limit outcome is given an axiomatic characterization as well.Nash solution, Raiffa solution, bargaining

The Time-Preference Nash Solution

We give an axiomatic characterization of the Time-Preference Nash Solution, a bargaining solution that is applied when the underlying preferences are defined over streams of physical outcomes. This bargaining solution is similar to the ordinal Nash solution introduced by Rubinstein, Safra and Thomson (1992), but it gives a different prediction when the set of physical outcomes is a set of lotteries.bargaining, ordinal Nash solution.

Equity financing of the entrepreneurial firm

Equity financing of the entrepreneurial firm has achieved a rapid increase over the past> decade. Venture capital funds, which finance privately held start-ups, raised a record $92.3 billion in 2000. This is a 30-fold increase relative to 1990. At Nasdaq, initial public offerings raised an all-time high of$53.6 billion in 2000, which is 24 times as much as in 1990. This article studies venture equity financing and equity financing through initial public offerings against the background of asymmetric information between the entrepreneur and the (outside) investor. The analysis shows that venture capital financing (i) is superior to initial public offerings when the entrepreneur has low initial wealth relative to the size of the project and (ii) is equivalent otherwise. This result highlights the importance of private equity in financing entrepreneurial enterprises. The Gramm-Leach-Bliley Act of 1999 allows banks to expand the scope of their activities in this arena. The act allows financial holding companies to provide equity financing to nonfinancial enterprises for up to ten years. In particular, the act defines a framework in which financial holding companies can sponsor private equity funds that may provide venture capital to entrepreneurial start-ups.Corporations - Finance ; Gramm-Leach-Bliley Act ; Venture capital

The time-preference Nash solution

We give an axiomatic characterization of the Time-Preference Nash Solution, a bargaining solution that is applied when the underlying preferences are defined over streams of physical outcomes. This bargaining solution is similar to the ordinal Nash solution introduced by Rubinstein, Safra, and Thomson (1992), but it gives a different prediction when the set of physical outcomes is a set of lotteries.

The Value of Shared Information Services

In this paper, we analyze the value of shared information services, both when they are operated by their members and when they are implemented by a monopoly provider. The value of information is defined as the compensating variation in price that makes a risk-averse agent indifferent between procuring an informative signal or not. We provide investment sharing rules that implement an individually rational Nash bargaining solution and compare this to the situation in which a nonscreening monopolist maximizes profits. We find that any efficient price schedule for information should take into account (1) the agentís confidence in the signal, (2) the project risk, (3) the agentís risk aversion, as well as (4) her wealth and the mean return if at least one of them is quite small. Interestingly, in a cooperative bargaining situation an agentís investment share may either increase or decrease when risk aversion goes up, depending on whether demand for information decreases faster than implicit bargaining power relative to the other agents or vice versa. We further show that even for CARA utilities, there are important wealth effects. Our results, including the definition of a critical Nash network size, provide a benchmark for the value of information that is shared by a group of agents for use in their respective projects and not employed strategically against each other