Formal Description
A two person bargain problem consists of a disagreement, or threat, point, where and are the respective payoffs to player 1 and player 2, and a feasibility set, a closed convex subset of, the elements of which are interpreted as agreements. Set is convex because an agreement could take the form of a correlated combination of other agreements. The problem is nontrivial if agreements in are better for both parties than the disagreement. The goal of bargaining is to choose the feasible agreement in that could result from negotiations.
Read more about this topic: Bargaining Problem
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