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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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On the 4th of June this year, the ABS published its quarterly report on Australia’s economic growth. The statistics were tepid—0.2% growth in the March quarter, or 1.3% for the year ending in the March quarter. Hidden behind the main drivers of this sluggish growth—global uncertainty, extreme weather, level government spending—was another factor that led a recent policy brief by the federal Parliamentary Library to conclude that Australia’s “long-term economic prosperity” is “under threat”.
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