A SOCIAL CHOICE RULE AND ITS IMPLEMENTATION IN PERFECT EQUILIBRIUM

A finite number of people have available a set of alternatives. We propose a particular lottery over these alternatives as a reasonable solution to the decision problem, namely the generalized Nash bargaining solution relative to a "random dictator" status quo point. This is well defined whenever each player has a unique best alternative. We show that this social choice rule can be implemented as the unique perfect equilibrium outcome of a game of perfect information with a finite number of stages and no chance moves. This also shows that the generalized Nash bargaining solution can be so implemented. © 1992.