Introduction

This book investigates bargaining betwen two agents. Its objective is to preset, to extend, and to apply the present state of theoretical knowledge. A wide range of questions will be considered: First of all, will two parties reach efficient agreements? Traditional economic theory gives a generally affirmative answer for perfectly rational agents, who can carry out complex calculation instantaneously and without cost. The book uses innovative methods to analyse the implications of less demanding assumptions. A practical question related to bargaining is: How much power does the design of institutions such as the U.N. Security Council give to each of its members? Formally, nonpermanent members’ votes are necessary to pass resolutions, but theoretical investigation of pre-voting negotiation attributes all power to the five permanent members. Or one may ask whether a society should rather finance the education in higher mathematics for a talented person than remedial training for a retarded person? Different concepts of justice yield different answers. Which particular concept is implemented in a given society is also a matte of bargaining, and it is of special philosophical interest to investigate which bargain will be struck in an ideal society in which individual talents and resources are not yet known.