On the ranking of bilateral bargaining opponents

We fix the status quo (Q) and one of the bilateral bargaining agents to examine how shifting the opponent’s ideal point away from Q in a unidimensional space affects the Nash (NS) and the Kalai-Smorodinsky (KS) bargaining solutions. As anticipated, the bargainer whose ideal point is farthest from Q prefers an opponent whose ideal is closest to his own. On the other hand, the ranking of opponents by the player closest to Q depends on the opponent’s intensity of preferences (or absolute risk aversion, ARA). An intuitive ranking emerges when the opponent preferences exhibits increasing ARA. However, under decreasing ARA, the player closest to Q prefers a more extreme opponent since the farther the opponent’s ideal is from Q, the less intense her preferences and the easier she is to satisfy. 131