Reduced-Form Allocations with Complementarity: A 2-Person Case

Abstract: We investigate the implementation of reduced-form allocation probabilities in a two-person bargaining problem without side payments, where the agents have to select one alternative from a finite set of social alternatives. We provide a necessary and sufficient condition for the implementability. We find that the implementability condition in bargaining has some new feature compared to Border's theorem. Our results have applications in compromise problems and package exchange problems where the agents barter indivisible objects and the agents value the objects as complements.