3. Bargaining theory characterizations
Dagan and Volij assume linear utility of payments made to each creditor of a single debtor, and that the creditors’ threat points are all 0. They accordingly define the Nash Bargaining solution to be the feasible allocation that maximizes the product of payments to the creditors. In their Proposition 1 (op.cit., p. 292), they prove that the Nash Bargaining solution is the CE rule defined above in Section 1(b).
It is insightful to generalize and formally prove this result when utilities are strictly concave, as I now do.
