Getting Together

Abstract This chapter introduces cooperative game theory by examining the axiomatic theory of two-person bargaining problems. The link between cooperative and noncooperative game theory is first explained in terms of the Nash program. The idea of a cooperative payoff region is then developed for use in applied contexts. The Coase theorem is explained for the case of a Nash bargaining problem. A variant of the Nash bargaining solution with both a breakdown point and a deadlock point is described. A proof of Nash's axiomatic bargaining theorem is offered. The Kalai-Smorodinsky bargaining solution and the Walrasian bargaining solution are offered as alternatives to Nash's solution.