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Anyone who has studied first year economics will recall the basics of the production theory: when labour input rises, total output should follow. While this sounds simple in theory, Australia’s economic reality has thrown a real curveball into the equation. Despite the fact that we are working longer hours, aggregate output has barely seemed to budge. In the year to March 2025, labour productivity fell by 1%, while multifactor productivity crawled up just slightly by 0.1%.
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A key concept familiar to game theorists is bargaining: the study of how surplus should be shared among rational agents (Thomson, 1994). In simple terms, cooperative bargaining seeks for a fair way to split the gains from cooperation. When both sides are willing to work together, these solutions can lead to outcomes that make everyone better off. While terms like “Nash equilibrium”, “Pareto efficiency” and “mixed motive” may sound abstract, we likely encounter bargaining all the time. This essay aims to explore the everyday examples of bargaining, illustrating how fairness and strategy shape outcomes in all kinds of negotiations both within and beyond white-collar settings.
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