Trading bargaining weights

Ervig U, Haake C-J. Trading bargaining weights. JOURNAL OF MATHEMATICAL ECONOMICS. 2005;41(8):983-993.We consider a model, in which two agents are engaged in two separate bargaining problems. We introduce a notion of bargaining weights (bargaining power), which is basically given by asymmetric versions of the Perles-Maschler bargaining solution. Thereby, we view bargaining power as ordinary goods that can be traded in an exchange economy. With equal initial endowment of bargaining power there exists a Walrasian equilibrium in this exchange economy such that the utility allocation in equilibrium coincides with the Perles-Maschler bargaining solution of the aggregate bargaining problem. Equilibrium prices are given by the primitives of the two bargaining problems. (c) 2005 Elsevier B.V. All rights reserved