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 article presents a more complete theory that expands their solution. Specifically, 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 justification 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.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 917-966 |
| Number of pages | 50 |
| Journal | Quarterly Journal of Economics |
| Volume | 128 |
| Issue number | 2 |
| DOIs | |
| State | Published - May 2013 |
Funding
*The authors thank Geofroy de Clippel, Francoise Forges, Dov Monderer, Phil Reny, Rakesh Vohra, and Robert Wilson, as well as other seminar participants at Northwestern, Stanford, The Hebrew University, The Conference of Public Economic Theory in Galway, and the International Conference on Game Theory in Stony Brook for helpful comments. In addition, journal reviewers of an early version of the article made important suggestions that contributed significantly to the current version. This research is partly supported by National Science Foundation Grant No. SES-0527656 in Economics/Computer Science.
ASJC Scopus subject areas
- Economics and Econometrics