Repeated bargaining under uncertainty

The Nash bargaining scheme is extended to discrete and continuous time dynamic games. The bargaining takes place under future uncertainty and the contracting takes place at each stage on the basis of the available information. A two-level hierarchical method to handle such problems is presented. At the lower level a weighted sum of the decision makers' objectives is maximized. This corresponds to solving the cooperative problem with a given contract, which is expressed by the weights of the individual objectives. At the top level the contract is determined by solving an algebraic equation such that the rationality axioms of the Nash bargaining scheme are satisfied for the whole time interval of cooperation.