Cooperation in Strategic Games Revisited

Adam Kalai and Ehud Kalai

Discussion Papers from Northwestern University, Center for Mathematical Studies in Economics and Management Science

Abstract: For two-person complete-information strategic games with transferable utility, all major variable-threat bargaining and arbitration solutions coincide. This confluence of solutions by luminaries such as Nash, Harsanyi, Raiffa, and Selten, is more than mere coincidence. Staying in the class of two-person games with transferable unility, the present paper presents a more complete theory that expands their solution. Speci cally, it presents: (1) a decomposition of a game into cooperative and competitive components, (2) an intuitive and computable closed-form formula for the solution, (3) an axiomatic justi cation of the solution, and (4) a generalization of the solution to games with private signals, along with an arbitration scheme that implements it. The objective is to restart research on cooperative solutions to strategic games and their applications.

Keywords: Cooperative Games; Noncooperative Games; Bargaining Theory JEL Classification Numbers: C71; C72; C78 (search for similar items in EconPapers)
Date: 2011-12-01
New Economics Papers: this item is included in nep-gth and nep-hpe
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