On the redundancy of the implicit welfarist axiom in bargaining theory

Abstract

Nash's characterization of his famous bargaining solution has long faced the objection of being welfarist: a bargaining situation is captured by a utility possibility set and a utility vector prevailing in case of disagreement, with no further information regarding the underlying economic environment. The present paper shows that a straightforward adaptation of Nash's axioms in a natural economic environment with lotteries does characterize his solution. A similar result holds for Kalai and Smorodinsky's [8] characterization of their solution if and only if the domain contains multiple goods. The non-welfarist characterization of the Nash solution extends to a larger class of preferences that accommodate some forms of non-expected utility.