Non-cooperative bargaining in natural monopolies

The joint production of a single output from a single input by a group of potential users of a technology is usually analyzed in the literature using a “cooperative” approach. We provide an analysis for such economies by means of non-cooperative bargaining. Two bargaining models are analyzed, one based on demands the other on proposals. We show that the convexity of the production function implies that subgame perfect equilibrium outcomes of these bargaining games are coalition stable, (i.e., core outcomes). In the case of the proposal model, the equilibrium outcomes yield even a full characterization of the core. Journal of Economic Literature Classification Numbers C72, D21, D42.