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The essential two-person bargaining domain consists of a compact convex set of feasible utility vectors $F$, a disagreement point $d\in F$, and at least one feasible vector strictly exceeding $d$ coordinatewise. The Nash bargaining solution selects a jointly feasible improvement using a rule characterized by Pareto efficiency, bargaining symmetry, positive affine invariance in bargaining and bargaining independence of irrelevant alternatives.

Use the usual essential two-person Nash bargaining problem: $F\subset {\mathbb{R}}^2$ is a compact convex set, $d\in F$ is the disagreement point, and some $u\in F$ satisfies $u_i>d_i$ for both players. The Nash bargaining solution isThe positive maximum exists by compactness and essentiality. On positive gains, maximizing this Nash product is equivalent to maximizing $\log (u_1-d_1)+\log (u_2-d_2)$, a strictly concave function. Convexity then gives a unique maximizer. The essentiality and compactness hypotheses matter: for example, with $F=[0,1]\times \{0\}$ and $d=0$, the product is zero everywhere and its argmax alone is not a single-valued definition.

The rule satisfies all four axioms. Pareto efficiency: a feasible vector dominating the chosen vector with at least one strict improvement would increase its positive Nash product. Bargaining symmetry: if the problem is unchanged by swapping players, uniqueness makes the answer unchanged, so the two payoffs agree. Positive affine invariance in bargaining: for $v_i=a_i{u}_i+b_i$ with $a_i>0$, gains transform to $a_i(u_i-d_i)$ and the product is multiplied by the positive constant $a_1{a}_2$, preserving its maximizer. Bargaining independence of irrelevant alternatives: if $G\subseteq F$ is another admissible feasible set containing the chosen vector and the same disagreement point, that vector remains the unique product maximizer over $G$.

To prove characterization, let $f$ be any feasible single-valued rule satisfying these axioms, and let $u^{\ast }=N(F,d)$. Normalize payoffs by the positive affine transformationThe transformed set $H$ has disagreement point zero and product maximizer $e=(1,1)$. For any $z\in H$, convexity puts $e+t(z-e)$ in $H$; for sufficiently small $t>0$ both gains remain positive. The one-sided derivative of the product at its maximum is therefore nonpositive:Thus $H\subseteq \{z:z_1+z_2\le 2\}$. By compactness choose $M\ge 0$ so every coordinate of every $z\in H$ is at least $-M$. The supporting triangle for Nash bargaining isIt contains $H$, is compact, convex, symmetric and essential, and contains disagreement zero. Symmetry forces $f(T_M,0)$ onto the diagonal; Pareto efficiency then forces it to be $e=(1,1)$. Since $e\in H\subseteq T_M$, bargaining independence of irrelevant alternatives gives $f(H,0)=e$. Undoing the normalization by positive affine invariance in bargaining gives $f(F,d)=u^{\ast }$. Hence the four axioms uniquely characterize the Nash bargaining solution on this domain.

Normalize a positive Nash product maximizer and the disagreement point to $(1,1)$ and zero. The first-order product inequality along every feasible segment places the transformed set in $z_1+z_2\le 2$. Compactness allows a symmetric containing triangle with finite lower coordinate bounds. Bargaining symmetry and Pareto efficiency choose $(1,1)$ in that triangle; bargaining independence of irrelevant alternatives transfers this choice to the original normalized set. Positive affine invariance in bargaining then proves the full characterization.