The Nash bargaining solution
A new treatment is presented of a classical economic problem, one which occurs in many forms, as bargaining, bilateral monopoly, etc.
— John Nash, The Bargaining Problem (1950) In 1948, still an undergraduate at the Carnegie Institute of Technology, Nash took a course in international economics, the only economics course of his life. He came out of it with a question: when two people negotiate, how do they share the gains from a deal? Economists thought the answer depended on each side’s psychology, skill and bluffing, and that there was nothing to say in general. Nash showed that, if the deal must satisfy a few reasonable requirements, there is only one possible answer. The paper, written before he arrived at Princeton, was published in 1950 in the journal Econometrica.