Two parties bargaining over a pie whose size is determined by the investment decisions of both. The bargaining rule is sensitive to the investment behavior. If a symmetric investments pro le is observed, bargaining proceeds according to the Nash Demand Game; otherwise bargaining proceeds...

Economists have a long tradition in identifying the evolution of cooperation in large, unstructured societies as a puzzle. We suggest a new explanation for cooperation which avoids restrictions of most previous attempts. Our explanation deals with the role of internalized norms for cooperation...