On Bargaining Norms

Abstract

This paper studies bargaining outcomes in economies in which agents may be able to impose outcomes that deviate from the relevant social norm, but incur costs when they decide to do so. It characterizes bargaining outcomes that are easiest to sustain as a social norm to which everybody will want to adhere.

Depending on the nature of the costs, the approach yields concepts like the Nash Bargaining solution, the Kalai-Smorodinsky solution, or - for coalitional games with transferable payoffs -refinements of the core. Set-valued solution concepts are derived that are relevant if one is unable or unwilling to make specific assumptions about the costs.

Keywords: bargaining, social norms, sanctions, internalised norms, 2-player bargaining, coalitional games

JEL Classification: C78, C71