Bargaining

Why Studying Business Strategy? | Business Strategies | Bargaining | Notes

Hobbes refer the State to state of nature. There is a choice between a state of nature in which a was of all againsts all and a peaceful society where the peace is enforced vy a State which acts in the interest of all. Hobbes's state of nature clearly see the advantages of creating State. Hoever, there are issues to be resolved. The people must agree to the rights which the State will defend and share the common interest in peace. They still need to decide what rights are selected and how people resolve conflicts of interst. This is where bargaining problem arises.

The bargaining problem arises in any situation in which two or more agents are able to produce some benefit through cooperating with one another. If they fail to agree, they do not get the potential benefit and both lose. For instance, there is a gain to both a union and an employer from reaching an agreement on more flexible hours so that production can respond more quickly. The question is how the surplus is to be distributed between a union and an employer.