Eduard Talamas from the IESE Business School will present "Nash-Credible Bargaining".

Abstract: Bargaining in a given team often involves outside options determined by bargaining in alternative teams, which depend, in turn, on bargaining in alternative teams, and so on. To resolve the indeterminacy caused by circular outside options, I introduce a new concept—Nash credibility—that requires the
outside option of each player in any given coalition to be the maximum she can justify using Nash bargaining in an alternative coalition without appealing to her own outside option there. Nash credibility uniquely pins down outside options—and hence the Nash bargaining solution—in every coalition. I represent the set of coalitions as a network that maps the sources of Nash credible outside options. This network is acyclic, and determines how shocks propagate via outside options: The effect of a marginal increase in the surplus of one coalition on the Nash-credible bargaining solution in another one is determined by the total weight of all even-length paths minus odd-length paths connecting them.