Title: Barter, efficiency, and money prices: dissecting Nash's bargaining example

Authors: Fritz Helmedag

Addresses: Fakultät für Wirtschaftswissenschaften, Technische Universität Chemnitz, Thüringer Weg 7, D-09107 Chemnitz, Germany

Abstract: John Nash's own illustration of his famous bargaining solution has fallen into oblivion. There, a good is traded that the giver appreciates more than the taker. Although this transaction contributes to the largest (weighted) product of utility gains, their sum falls below the attainable maximum which indicates efficiency. In addition, it is shown that with a medium of exchange and 'fair' prices both criteria can be met. The participants then enjoy the same benefits from exchange. Accordingly, even with only two persons, money can improve their welfare. The insights presented in this paper deserve to find their way into classrooms.

Keywords: bargaining; barter; Nash; money.

DOI: 10.1504/IJPEE.2018.093421

International Journal of Pluralism and Economics Education, 2018 Vol.9 No.3, pp.292 - 299

Received: 04 Aug 2017
Accepted: 06 Feb 2018
Published online: 25 Jul 2018 *

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