Bargaining and Cooperation in Strategic Form Games

In this paper we view bargaining and cooperation as an interaction superimposed on a game in strategic form. A multistage bargaining procedure for N players, the "proposer commitment" procedure, is presented. It is inspired by Nash's two-player variable-threat model; a key feature is the commitment to "threats." We establish links to classical cooperative game theory solutions, such as the Shapley value in the transferable utility case. However, we show that even in standard pure exchange economies, the traditional coalitional function may not be adequate when utilities are not transferable. (JEL: C70, C71, C78, D70) (c) 2010 by the European Economic Association.