The bargaining set in strategic market games

Abstract

This paper presents a hybrid equilibrium notion that blends together the 'cooperative' and the 'noncooperative' theories of competition. In particular, the Mas-Colell bargaining set has been modified in order to accommodate the features of strategic market games. In other words, allocations, objections and counter objections of the standard bargaining set theory are described for an economy, where trades among groups of individuals are conducted via the Shapley-Shubik mechanism. In the main part of the paper, it is proved that in atomless economies the allocations resulting from this equilibrium notion are competitive. © 2010 Springer-Verlag.