TY - GEN
AB - In this paper, we analyze the two-dimensional Nash bargaining solution (NBS) deploying a standard labor market negotiations model (see McDonald and Solow, 1981; Creedy and McDonald, 1991). We show that the two-dimensional bargaining problem can be decomposed into two one-dimensional problems such that the (Cartesian) product of the solutions of these problems replicates the solution of the two-dimensional problem, if the NBS is applied. However, this decomposition fails for any solution concept that does not satisfy the axiom of Independence of Irrelevant Alternatives (IIA axiom). Our decomposition result has significant implications for actual negotiations, as it allows for the decomposition of a multi-issue bargaining problem into a set of simpler problems, in particular a set of single-issue bargaining problems. In this way, the decomposition may help facilitate negotiations in labor markets and also in other environments.
AU - Haake, Claus-Jochen
AU - Upmann, Thorsten
AU - Duman, Papatya
ID - 15202
KW - Labor market negotiations
KW - Efficient bargains
KW - Nash bargaining solution
KW - Sequential bargaining
KW - Restricted bargaining games
TI - The Decomposability of the Nash Bargaining Solution in Labor Markets
VL - 128
ER -