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Dagon comments on Gains from trade: Slug versus Galaxy - how much would I give up to control you? - Less Wrong
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If I understand the proposal correctly, I think this bargaining solution can heavily favor someone with diminishing marginal utility vs someone with linear utility. For example suppose Alice and Bob each own 1 (infinitely divisible) unit of resource, and that's the default point. Alice values all resources linearly, with utility function A(a,b)=a, where a is resources consumed by Alice, b is resources consumed by Bob. Bob's utility function is B(a,b) = b if b<=1, else 1+(b-1)/9 if b<=1.9, else 1.1. Normalization causes Bob's utility function to be multiplied by 10, and the bargaining solution ends up giving Bob 1.9 units of resources. Correct?
Indeed. That is discussed in the last part of the "properties" section.
I think the argument is that this possible outcome is acceptable to Alice because she expects an equal chance of encountering trade opportunities where she benefits from the bargain.
I see a similarity between this risk and the Newcomb problem, but I'm not sure what additional assumptions this brings into the theory. What knowledge of your trading partner's decision mechanisms (source code) is necessary to commit to this agreement?