What is the relationship or difference between Nash and Coasian bargaining solutions? It is well-known that the Nash bargaining solution satisfies certain basic axioms. Which of these does the Coasian solution satisfy? Is the Nash solution applicable when there are externalities, and are the two solutions same/comparable in any sense?

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    $\begingroup$ I don't think the feasibility sets are the same in the two concepts. The Nash solution deals with one good while the Coase solution assumes that both the externality and money exist. First you would need some sort of mapping between these two spaces to make the solutions comparable. $\endgroup$
    – Giskard
    May 28 '15 at 17:34
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    $\begingroup$ What do you mena by "Coasian solution"? $\endgroup$ May 29 '15 at 5:49
  • $\begingroup$ @MichaelGreinecker: Pl. refer to this answer. $\endgroup$
    – Bravo
    May 29 '15 at 7:20
  • $\begingroup$ @Bravo I've read the original paper of Coase. It contains no formal model, in particular no formal model of bargaining. $\endgroup$ May 29 '15 at 7:58

There is no such thing as the "Coasian bargaining solution". This is a simple principle according to which parties find an agreement somewhere on the Pareto frontier when they bargain, which means that the outcome of the bargaining process is socially efficient (abstracting from equity issues).

The Nash bargaining solution refines our predictions by specifying where the solution is likely to be located on the Pareto frontier. In some sense, it is a subset of the Coasian bargaining outcome, which can be anywhere on the Pareto frontier. In contrast to the Coase principle, it is a theorem that rests on an axiomatic characterization.


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