On risk aversion and bargaining outcomes

Oscar Volij*, Eyal Winter

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

14 Scopus citations

Abstract

We revisit the well-known result that asserts that an increase in the degree of one's risk aversion improves the position of one's opponents. To this end, we apply Yaari's dual theory of choice under risk both to Nash's bargaining problem and to Rubinstein's game of alternating offers. Under this theory, unlike under expected utility, risk aversion influences the bargaining outcome only when this outcome is random, namely, when the players are risk lovers. In this case, an increase in one's degree of risk aversion increases one's share of the pie.

Original languageAmerican English
Pages (from-to)120-140
Number of pages21
JournalGames and Economic Behavior
Volume41
Issue number1
DOIs
StatePublished - Oct 2002

Keywords

  • Bargaining
  • Non-expected utility
  • Risk aversion

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