Distortion of Utilities and the Bargaining Problem

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. The Econometric Society is collaborating with JSTOR to digitize, preserve and extend access to Econometrica. Given two agents with von Neumann-Morgenstern utilities who wish to divide n commodities, consider the two-person noncooperative game with strategies consisting of concave, increasing von Neumann-Morgenstern utility functions as well as rules to break ties and whose outcomes are some solution to the bargaining game determined by the strategies used. It is shown that, for a class of bargaining solutions which includes those of Nash and Raiffa, Kalai and Smorodinsky, any constrained equal-income competitive equilibrium allocation for the true utilities is a Nash equilibrium outcome for the noncoop-erative game.