Skip to main content
SpringerLink
Log in

Cooperation and Institution in Games

  • Published:
The Japanese Economic Review Aims and scope Submit manuscript

Abstract

Based on recent developments in non-cooperative coalitional bargaining theory, I review game theoretical analyses of cooperation and institution. First, I present basic results of the random-proposer model and apply them to the problem of involuntary unemployment in a labour market. I discuss extensions to cooperative games with externalities and incomplete information. Next, I consider the enforceability of an agreement as an institutional foundation of cooperation. I re-examine the contractarian approach to the problem of cooperation from the viewpoint that individuals may voluntarily create an enforcement institution.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Adachi, T. and Y. Watanabe (2007) “Ministerial Weights and Government Formation: Estimation Using a Bargaining Model”, Journal of Law, Economics, and Organization, Vol. 24, pp. 95–119.

    Article  Google Scholar 

  • Albers, W. (1975) “Zwei Lösungskonzepte Für Kooperative Mehrpersonenspiele, Die Auf Anspruchsniveaus Der Spieler Basieren”, OR-Verfahren, Vol. XXI, Meisenheim, pp. 1–13.

    Google Scholar 

  • Aumann, R. (1961) “The Core of a Cooperative Game without Side Payments”, Transactions of the American Mathematical Society, Vol. 98, pp. 539–552.

    Article  Google Scholar 

  • Bandyopadhyay, S. and K. Chatterjee (2006) “Coalition Theory and Its Applications: A Survey”, The Economic Journal, Vol. 116, pp. 136–155.

    Article  Google Scholar 

  • Banks, J. and J. Duggan (2000) “A Bargaining Model of Collective Choice”, American Political Science Review, Vol. 94, pp. 73–88.

    Article  Google Scholar 

  • Baron, D. and J. Ferejohn (1989) “Bargaining in Legislatures”, American Political Science Review, Vol. 83, pp. 1181–1206.

    Article  Google Scholar 

  • Bloch, F. (1996) “Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division”, Games and Economic Behavior, Vol. 14, pp. 90–123.

    Article  Google Scholar 

  • Chatterjee, K., B. Dutta, D. Ray and K. Sengupta (1993) “A Noncooperative Theory of Coalitional Bargaining”, Review of Economic Studies, Vol. 60, pp. 463–477.

    Article  Google Scholar 

  • Coase, R. H. (1960) “The Problem of Social Cost”, Journal of Law and Economics, Vol. 3, pp. 1–44.

    Article  Google Scholar 

  • Compte, O. and P. Jehiel (2010) “The Coalitional Nash Bargaining Solution”, Econometrica, Vol. 78, pp. 1593–1623.

    Article  Google Scholar 

  • Cooter, R. D. (1989) “The Coase Theorem”, in J. Eatwell, M. Milgate and P. Newman, eds, The New Palgrave: Allocation, Information, and Markets, London: Macmillan, pp. 64–70.

    Chapter  Google Scholar 

  • Dixit, A. and M. Olson (2000) “Does Voluntary Participation Undermine the Coase Theorem?” Journal of Public Economics, Vol. 76, pp. 309–335.

    Article  Google Scholar 

  • Dutta, B. and R. Vohra (2005) “Incomplete Information, Credibility, and the Core”, Mathematical Social Sciences, Vol. 50, pp. 148–165.

    Article  Google Scholar 

  • Eraslan, H. (2002) “Uniqueness of Stationary Equilibrium Payoffs in the Baron–Ferejohn Model”, Journal of Economic Theory, Vol. 103, pp. 11–30.

    Article  Google Scholar 

  • Eraslan, H. and A. McLennan (2013) “Uniqueness of Stationary Equilibrium Payoffs in Coalitional Bargaining”, Journal of Economic Theory, Vol. 148, pp. 2195–2222.

    Article  Google Scholar 

  • Evans, R. (1997) “Coalitional Bargaining with Competition to Make Offers”, Games and Economic Behavior, Vol. 19, pp. 211–220.

    Article  Google Scholar 

  • Farrell, J. P. and E. Maskin (1989) “Renegotiation in Repeated Games”, Games and Economic Behavior, Vol. 1, pp. 327–360.

    Article  Google Scholar 

  • Forges, F., E. Minelli and R. Vohra (2002) “Incentives and the Core of An Exchange Economy: A Survey”, Journal of Mathematical Economics, Vol. 38, pp. 1–41.

    Article  Google Scholar 

  • Forges, F. and R. Serrano (2013) “Cooperative Games with Incomplete Information: Some Open Problems”, International Game Theory Review, Vol. 15, No. 2, pp. 1–17.

    Article  Google Scholar 

  • Gomes, A. (2005) “Multilateral Contracting with Externalities”, Econometrica, Vol. 73, pp. 1329–1350.

    Article  Google Scholar 

  • Gomes, A. and P. Jehiel (2005) “Dynamic Processes of Social and Economic Interaction: On the Persistence of Inefficiencies”, Journal of Political Economy, Vol. 113, pp. 626–667.

    Article  Google Scholar 

  • Gul, F. (1989) “Bargaining Foundations of the Shapley Value”, Econometrica, Vol. 57, pp. 81–95.

    Article  Google Scholar 

  • Harsanyi, J. C. (1974) “An Equilibrium-Point Interpretation of Stable Sets and a Proposed Alternative Definition”, Management Science, Vol. 20, pp. 1472–1495.

    Article  Google Scholar 

  • Harsanyi, J. C. and R. Selten (1972) “A Generalized Nash Solution for Two-Person Bargaining Games with Incomplete Information”, Management Science, Vol. 18, pp. 80–106.

    Article  Google Scholar 

  • Hart, S. and A. Mas-Colell (1996) “Bargaining and Value”, Econometrica, Vol. 64, pp. 357–380.

    Article  Google Scholar 

  • Horniaček, M. (2008) “Negotiation, Preferences over Agreements, and the Core”, International Journal of Game Theory, Vol. 37, pp. 235–249.

    Article  Google Scholar 

  • Hurwicz, L. (1960) “Optimality and Informationally Efficiency in Resource Allocation Processes”, in K. J. Arrow, S. Karlin and P. Suppes, eds, Mathematical Methods in the Social Sciences, Stanford: Stanford University Press, pp. 27–46.

    Google Scholar 

  • Hyndman, K. and D. Ray (2007) “Coalition Formation with Binding Agreements”, Review of Economic Studies, Vol. 74, pp. 1125–1147.

    Article  Google Scholar 

  • Kawamori, T. (2008) “A Repeated Coalitional Bargaining Model”, Mathematical Social Sciences, Vol. 55, pp. 292–298.

    Article  Google Scholar 

  • Keynes, J. M. (1936) The General Theory of Employment, Interest, and Money, London: Macmillan Press.

    Google Scholar 

  • Kosfeld, M., A. Okada and A. Riedl (2009) “Institution Formation in Public Goods Games”, American Economic Review, Vol. 99, pp. 1335–1355.

    Article  Google Scholar 

  • Laruelle, A. and F. Valenciano (2008) “Noncooperative Foundations of Bargaining Power in Committees and the Shapley–Shubik Index”, Games and Economic Behavior, Vol. 63, pp. 341–353.

    Article  Google Scholar 

  • Maruta, T. and A. Okada (2012) “Dynamic Group Formation in the Repeated Prisoner’s Dilemma”, Games and Economic Behavior, Vol. 74, pp. 269–284.

    Article  Google Scholar 

  • Miyakawa, T. (2009) “Existence and Efficiency of a Stationary Subgame-Perfect Equilibrium in Coalitional Bargaining Models with Nonsuperadditive Payoffs”, Economic Theory, Vol. 39, pp. 291–306.

    Article  Google Scholar 

  • Moldovanu, B. and E. Winter (1994) “Core Implementation and Increasing Returns to Scale for Cooperation”, Journal of Mathematical Economics, Vol. 23, pp. 533–548.

    Article  Google Scholar 

  • —— and —— (1995) “Order Independent Equilibria”, Games and Economic Behavior, Vol. 9, pp. 21–34.

    Article  Google Scholar 

  • Montero, M. (2002) “Non-Cooperative Bargaining in Apex Games and the Kernel”, Games and Economic Behavior, Vol. 41, pp. 309–321.

    Article  Google Scholar 

  • —— (2006) “Noncooperative Foundations of the Nucleolus in Majority Games”, Games and Economic Behavior, Vol. 54, pp. 380–397.

    Article  Google Scholar 

  • Montero, M. and A. Okada (2007) “Riskless versus Risky Bargaining Procedures: The Aumann–Roth Controversy Revisited”, Japanese Economic Review, Vol. 58, pp. 294–302.

    Article  Google Scholar 

  • Nash, J. F. (1950) “The Bargaining Problem”, Econometrica, Vol. 18, pp. 155–162.

    Article  Google Scholar 

  • —— (1951) “Non-Cooperative Games”, Annals of Mathematics, Vol. 54, pp. 286–295.

    Article  Google Scholar 

  • —— (1953) “Two-Person Cooperative Games”, Econometrica, Vol. 21, pp. 128–140.

    Article  Google Scholar 

  • Okada, A. (1992) “Noncooperative Bargaining and the Core of an N-Person Characteristic Function Game”, Control and Cybernetics, Vol. 21, pp. 231–250.

    Google Scholar 

  • —— (1993) “The Possibility of Cooperation in an N-Person Prisoners’ Dilemma with Institutional Arrangements”, Public Choice, Vol. 77, pp. 629–656.

    Article  Google Scholar 

  • —— (1996) “A Noncooperative Coalitional Bargaining Game with Random Proposers”, Games and Economic Behavior, Vol. 16, pp. 97–108.

    Article  Google Scholar 

  • —— (2000) “The Efficiency Principle in Non-Cooperative Coalitional Bargaining”, Japanese Economic Review, Vol. 51, pp. 34–50.

    Article  Google Scholar 

  • —— (2008) “The Second-Order Dilemma of Public Goods and CapitalAccumulation”, Public Choice, Vol. 135, pp. 165–182.

    Article  Google Scholar 

  • —— (2010) “The Nash Bargaining Solution in General N-Person Cooperative Games”, Journal of Economic Theory, Vol. 145, pp. 2356–2379.

    Article  Google Scholar 

  • —— (2011) “Coalitional Bargaining Games with Random Proposers: Theory and Application”, Games and Economic Behavior, Vol. 73, pp. 227–235.

    Article  Google Scholar 

  • —— (2012) “Non-Cooperative Bargaining and the Incomplete Informational Core”, Journal of Economic Theory, Vol. 147, pp. 1165–1190.

    Article  Google Scholar 

  • —— (2013) “A Non-Cooperative Bargaining Theory with Incomplete Information: Verifiable Types”, Discussion Paper 2013–15, Hitotsubashi University.

  • —— (2014) “The Stationary Equilibrium of Three-Person Coalitional Bargaining Games with Random Proposers: A Classification”, International Journal of Game Theory, Vol. 43, pp. 953–973.

    Article  Google Scholar 

  • Okada, A. and E. Winter (2002) “A Noncooperative Axiomatization of the Core”, Theory and Decision, Vol. 53, pp. 1–28.

    Article  Google Scholar 

  • Oliver, P. (1980) “Rewards and Punishments as Selective Incentives for Collective Action: Theoretical Investigations”, American Journal of Sociology, Vol. 85, pp. 1356–1375.

    Article  Google Scholar 

  • Osborne, M. J. and A. Rubinstein (1990) Bargaining and Markets, New York: Academic Press.

    Google Scholar 

  • Ostrom, E. (1990) Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge: Cambridge University Press.

    Book  Google Scholar 

  • Palfrey, T. and H. Rosenthal (1984) “Participation and the Provision of Discrete Public Goods: A Strategic Analysis”, Journal of Public Economics, Vol. 24, pp. 171–193.

    Article  Google Scholar 

  • Parsons, T. (1937) The Structure of Social Action, New York: MacGraw-Hill.

    Google Scholar 

  • Pérez-Castrillo, D. and D. Wettstein (2001) “Bidding for the Surplus: A Non-Cooperative Approach to the Shapley Value”, Journal of Economic Theory, Vol. 100, pp. 274–294.

    Article  Google Scholar 

  • Perry, M. and P. J. Reny (1994) “A Noncooperative View of Coalition Formation and the Core”, Econometrica, Vol. 62, pp. 795–817.

    Article  Google Scholar 

  • Ray, D. (2007) A Game-Theoretic Perspective on Coalition Formation, Oxford: Oxford University Press.

    Book  Google Scholar 

  • Ray, D. and R. Vohra (1999) “A Theory of Endogenous Coalition Structures”, Games and Economic Behavior, Vol. 26, pp. 286–336.

    Article  Google Scholar 

  • —— and —— (2014) “Coalition Formation”, in P. Young and S. Zamir, eds, Handbook of Game Theory, Vol. 4, Amsterdam: North-Holland, pp. 239–326.

    Google Scholar 

  • Rubinstein, A. (1982) “Perfect Equilibrium in a Bargaining Model”, Econometrica, Vol. 50, pp. 97–109.

    Article  Google Scholar 

  • Saijo, T. and T. Yamato (1999) “A Voluntary Participation Game with a Non-Excludable Public Good”, Journal of Economic Theory, Vol. 84, pp. 227–242.

    Article  Google Scholar 

  • Seidmann, D. J. and E. Winter (1998) “A Theory of Gradual Coalition Formation”, Review of Economic Studies, Vol. 65, pp. 793–815.

    Article  Google Scholar 

  • Selten, R. (1973) “A Simple Model of Imperfect Competition, Where 4 Are Few and 6 Are Many”, International Journal of Game Theory, Vol. 2, pp. 141–201.

    Article  Google Scholar 

  • —— (1981) “A Noncooperative Model of Characteristic-Function Bargaining”, in V. Boehm and H. Nachthanp, eds, Essays in Game Theory and Mathematical Economics in Honor of Oskar Morgenstern, Mannheim: Bibliographisches Institut, pp. 131–151.

    Google Scholar 

  • Serrano, R. (1995) “A Market to Implement the Core”, Journal of Economic Theory, Vol. 67, pp. 285–294.

    Article  Google Scholar 

  • Serrano, R. and R. Vohra (1997) “Non-Cooperative Implementation of the Core”, Social Choice and Welfare, Vol. 14, pp. 513–525.

    Article  Google Scholar 

  • —— and —— (2007) “Information Transmission in Coalitional Voting Games”, Journal of Economic Theory, Vol. 134, pp. 117–137.

    Article  Google Scholar 

  • Smith, A. (1776) An Inquiry into the Nature and Causes of the Wealth of Nations, E. Cannan, ed., Chicago: University of Chicago Press.

    Google Scholar 

  • Snyder, J. M. Jr, M. M. Ting and S. Ansolabehere (2005) “Legislative Bargaining under Weighted Voting”, American Economic Review, Vol. 95, pp. 981–1004.

    Article  Google Scholar 

  • Stole, L. A. and J. Zwiebel (1996) “Intra-Firm Bargaining under Non-Binding Contracts”, Review of Economic Studies, Vol. 63, pp. 375–410.

    Article  Google Scholar 

  • Sutter, M., S. Haigner and M. G. Kocher (2010) “Choosing the Carrot or the Stick? Endogenous Institutional Choice in Social Dilemma Situations”, Review of Economic Studies, Vol. 77, pp. 1540–1566.

    Article  Google Scholar 

  • Sutton, J. (1986) “Non-Cooperative Bargaining Theory: An Introduction”, Review of Economic Studies, Vol. 53, pp. 709–724.

    Article  Google Scholar 

  • Traulsen, A., T. Röhl and M. Milinski (2012) “An Economic Experiment Reveals That Humans Prefer Pool Punishment to Maintain the Commons”, Proceedings of the Royal Society B, Vol. 279, pp. 3716–3721.

    Article  Google Scholar 

  • Vohra, R. (1999) “Incomplete Information, Incentive Compatibility, and the Core”, Journal of Economic Theory, Vol. 86, pp. 123–147.

    Article  Google Scholar 

  • von Neumann, J. and O. Morgenstern (1944) Theory of Games and Economic Behavior, Princeton: Princeton University Press.

    Google Scholar 

  • Wilson, R. (1978) “Information, Efficiency, and the Core of an Economy”, Econometrica, Vol. 46, pp. 807–816.

    Article  Google Scholar 

  • Yamagishi, T. (1986) “The Provision of a Sanctioning System as a Public Good”, Journal of Personality and Social Psychology, Vol. 51, pp. 110–116.

    Article  Google Scholar 

  • Yan, H. (2002) “Noncooperative Selection of the Core”, International Journal of Game Theory, Vol. 31, pp. 527–540.

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Hitotsubashi University, Japan

    Akira Okada

Authors
  1. Akira Okada
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Okada, A. Cooperation and Institution in Games. JER 66, 1–32 (2015). https://doi.org/10.1111/jere.12058

Download citation

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1111/jere.12058

JEL Classification Numbers

Search

Navigation