Cooperation and Institution in Games

Based on recent developments in non-cooperative coalitional bargaining theory, I review game theoretical analyses of cooperation and institution. The first part presents basic results of the random-proposer model and applies them to the problem of involuntary unemployment in a labor market. Extensions to cooperative games with externality and incomplete information are discussed. The second part considers enforceability of an agreement as an institutional foundation of cooperation. I re-examine the contractarian approach to the problem of cooperation under the view that individuals may voluntarily create an enforcement institution.