Non-cooperative implementation of the core

Abstract.

 The aim of this paper is to examine the non-cooperative basis of the core. We provide mechanisms that are motivated closely by the very description of the core, and have the property that their non-cooperative equilibrium outcomes coincide with the core. For general economic environments we construct an extensive form mechanism in which each player proposes a status-quo and then also has an opportunity to recontract with any other coalition. A proposal to recontract is enforced if and only if it meets with the unanimous approval of such a coalition. We show that subgame perfect outcomes of this mechanism coincide with the core allocations of the underlying economy. We also consider situations, such as labor managed firms, in which the mechanism designer does not know the set of feasible allocations but can observe the output (utility).