The author is grateful to an anonymous reviewer for many helpful remarks and suggestions that have significantly improved the paper. The usual disclaimer applies.
In this paper, we introduce a new two-person bargaining solution, which we call iterated Kalai–Smorodinsky–Nash compromise (IKSNC). For its characterization, we present an axiom called \(\varGamma \)-Decomposability which is satisfied by any solution that is decomposable with respect to a given reference solution \(\varGamma \). We show that the IKSNC solution is uniquely characterized by \(\varGamma \)-Decomposability whenever \(\varGamma \) satisfies the standard axioms of Independence of Equivalent Utility Representations and Symmetry, along with three additional axioms, namely Restricted Monotonicity of Individually Best Extensions, Weak Independence of Irrelevant Alternatives, and Weak Pareto Optimality under Symmetry.