Cooperative Outcomes through Noncooperative Games

Abstract This paper shows the equivalence between the stable solution set of any cooperative game in characteristic form (G1) and the subgame perfect Nash equilibria in pure strategies of a certain noncooperative game (G2). Players of G1 are named "agents." G2 is played by different players ("principals") who compete in wages to attract agents. The equivalence result holds when there are enough principals (if the game is superadditive, two principals suffice). Finally, another related cooperative game (G3) is constructed with both principals and agents as players. For G2 and G3 the same result is then proven, for any number of principals. Journal of Economic Literature Classification Numbers: C71 and C72.