Nir Dagan / Teaching

Bargaining theory and applications (EC147)

Brown University, Fall 1999


General description

The course discusses game theoretic models of bargaining. Both the axiomatic and the strategic approaches are considered. The Nash bargaining problem and alternating offers models will be the main representatives of the the two approaches respectively.


The prerequisite is either EC111 or EC113. We will not use complicated mathematics, but the students' willingness to follow formal and abstract reasoning is important.

The course applies game theory to study bargaining, however, no prior knowledge of game theory is required in order to participate. The necessary tools from game theory will be taught as a part of the course.


Lectures are scheduled for I Hour, Tuesday and Thursday, 10:30-11:50. The professor may be contacted in several ways.


The grades will be composed of the following parts: Homeworks 20%, midterm exam 40% and final exam 40%


There is no required textbook for the course. Handouts will be handed out instead. In addition, the interested students may use the books listed below. One should note that these are designed for graduate level courses, and thus might be difficult for some of the students.

Outline of the course

  1. Introduction: game theoretic modelling of economic situations.
  2. Decision making under risk: the St. Petersburg paradox, and the expected utility hypothesis.
  3. The axiomatic approach: Nash's bargaining problem and solution.
  4. Applications of the Nash solution
  5. Strategic games in normal form: Nash equilibrium.
  6. Strategic games in extensive form: Nash equilibrium, backward induction and subgame perfect equilibrium.
  7. The strategic approach: a finite horizon alternating offers bargaining game.
  8. The relationships between the axiomatic and strategic approaches.