BARGAINING POWER IN THE NASH DEMAND GAME AN EVOLUTIONARY APPROACH

A population of buyers and a population of sellers meet repeatedly in order to exchange a good. The price is fixed through a variant of the Nash demand game. This paper analyzes the prices that are robust to experimentation in the sense of stochastic stability. Under some conditions only one price is selected and it gives a share of the surplus to each side of the market that corresponds to the generalized Nash bargaining solution. The bargaining power of each party depends on the division of the unclaimed surplus and the population sizes. The bargaining power of a given population will increase either with a reduction in its fraction of the unclaimed surplus or with a decrease in its own size.