Nash-Bargained Consumption Decisions: A Revealed Preference Analysis

Authors


  •  Corresponding author: Bram De Rock, ECARES, Université Libre de Bruxelles, Avenue F.D. Roosevelt 50, CP 114/04, B-1050 Brussels, Belgium. Email: bderock@ulb.ac.be.

  • We are grateful to the Editor Steve Pischke and two anonymous referees for helpful comments and suggestions, which substantially improved the article. Laurens Cherchye gratefully acknowledges financial support from the Research Fund K.U. Leuven through the grant STRT1/08/004. Thomas Demuynck gratefully acknowledges the Fund for Scientific Research – Flanders (FWO-Vlaanderen) for his postdoctoral fellowship. Bram De Rock gratefully acknowledges the European Research Council (ERC) for his Starting Grant.

Abstract

We present revealed preference characterisations of Nash-bargained consumption decisions in a two-player game. Our main analysis focuses on the symmetric Nash-bargaining solution with observed threat point bundles. However, we also present the testable implications of the generalised Nash-bargaining solution and the settings in which threat point bundles are not observed. We illustrate the practical usefulness of these conditions by means of an application to experimental data, which provides a first empirical test of the Nash-bargaining model on consumption data.

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