“When two parties bargain over the division of a pie there are two

conflicting considerations: cooperation is required if the pie is to be created

in the first place. However, a degree of competition is unavoidable, the

larger the share conferred on one party the smaller must be the share given

to the other party.” Use the Nash bargaining solution to explain this

statement and show how the parameters in the ‘Nash product’ determine the

outcome of the bargain.