A non-welfarist solution for two-person bargaining situations.

In this paper we present a non-welfarist solution which is applicable to a broad spectrum of twoagent bargaining problems, such as exchange economies, location problems and division problems. In contrast to welfarist bargaining solutions, it depends only on the agents' preferences. not on their specific utility representation, and takes explicitly into account the underlying space of alternatives. We offer a simple sequential move mechanism, without chance moves, that implements our solution in subgame perfect equilibrium. Moreover, an axiomatic characterization of the solution is provided. It is shown that the solution coincides with the Kalai-Rosenthal bargaining solution after choosing a suitable utility representation of the preferences. When applied to exchange economies with equal initial endowments for both agents, the solution generates envy-free, Pare to efficient egalitarian equivalent allocations.Bargaining; Nash program; Welfarism; Non-welfarism; Exchange economies; Location problems; Implementation;

Computational Complexity of the Walrasian Equilibrium Inequalities

Recently Cherchye et al. (2011) reformulated the Walrasian equilibrium inequalities, introduced by Brown and Matzkin (1996), as an integer programming problem and proved that solving the Walrasian equilibrium inequalities is NP-hard. Following Brown and Shannon (2000), we reformulate the Walrasian equilibrium inequalities as the Hicksian equilibrium inequalities. Brown and Shannon proved that the Walrasian equilibrium inequalities are solvable iff the Hicksian equilibrium inequalities are solvable. We show that solving the Hicksian equilibrium inequalities is equivalent to solving an NP-hard minimization problem. Approximation theorems are polynomial time algorithms for computing approximate solutions of NP-hard minimization problems. The contribution of this paper is an approximation theorem for the NP-hard minimization, over indirect utility functions of consumers, of the maximum distance, over observations, between social endowments and aggregate Marshallian demands. In this theorem, we propose a polynomial time algorithm for computing an approximate solution to the Walrasian equilibrium inequalities, where explicit bounds on the degree of approximation are determined by observable market data