In the DMP 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 both the firm and the worker will receive a constant share of the surplus from a match. This is because both parties aim to maximize their own utility, but also recognize that the other party has bargaining power and should receive some benefit from the match as well. The constant share ensures that both parties are satisfied with the outcome and that the surplus is divided fairly.

In the DMP Model,Nash Bargaining Implies