The Bargaining Problem

This lecture begins the Bargaining 101 course by introducing the idea of a bargaining problem.

Takeaway Points

  1. During negotiations, many agreements may be mutually acceptable to parties.
  2. For example, if you must receive a wage of at least $20 per hour and your employer is willing to pay you at most $50 per hour, then any wage between $20 and $50 is mutually acceptable. We call these values the bargaining range.
  3. Bargaining power determines where the wage ultimately falls.

This course mostly covers the technical aspects of bargaining. You will need to have completed Game Theory 101 to fully appreciate the class. In contrast, the Game Theory 101: Bargaining book places greater emphasis on applications and assumes no prior knowledge of game theory.


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