In the two-sided search model, Nash Bargaining implies
A) the firm receives the total surplus from a match.
B) the worker receives the total surplus from a match.
C) the firm and the worker receive a constant share of the surplus from a match.
D) the firm receives an increasing share of the surplus and the worker a decreasing share.
E) the firm and the worker reduce the total surplus to zero.

Question

Quizplus · Accepted Answer

Nash Bargaining implies that the firm and the worker will receive a constant share of the surplus from a match, also known as the "bargaining solution" or the "negotiated outcome". This is because Nash Bargaining assumes that both parties have equal bargaining power and therefore will reach an agreement where each party receives the same share of the surplus.

In the Two-Sided Search Model, Nash Bargaining Implies