### Abstract

Bargaining problems are considered where the preferences of the bargainers deviate from expected utility but can be modelled according to rank-dependent utility theory. Under rank-dependent utility both the utility function and the probability weighting function influence the risk attitude of a decision maker. The same definition of risk aversion leads to two forms of risk aversion: utility risk aversion and probabilistic risk aversion. The main finding is that these two forms can have surprisingly opposite consequences for bargaining solutions that exhibit a weak monotonicity property. In particular, in a large class of bargaining problems both increased utility risk aversion and decreased probabilistic risk aversion of the opponent are advantagous for a player. This is demonstrated for the kalai–smorodinsky bargaining solution. The nash bargaining solution does not behave regularly in this respect.

Original language | English |
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Pages (from-to) | 154-175 |

Journal | Journal of Economic Theory |

Volume | 110 |

DOIs | |

Publication status | Published - 1 Jan 2003 |

## Cite this

Peters, H. J. M., & Köbberling, V. (2003). The Effect of Decision Weights in Bargaining Problems.

*Journal of Economic Theory*,*110*, 154-175. https://doi.org/10.1016/S0022-0531(03)00009-7