A model of agreements in strategic form games

Because in a strategic form game all the possibilities of communication available to the players must be explicitly listed in the strategy spaces, coalitions and coalitional behaviour are not very often taken into account in noncooperative games. However, it may be desirable, especially in applications, to separate the basic strategic features of a situation from those strategic features added as a consequence of the possibility of coalitional behaviour. We define an equilibrium for the bargaining procedure called by Greenberg (''The Theory of Solid Situations: An Alternative Game-Theoretic Approach,'' Cambridge University Press, Cambridge, UK, 1990), Coalitional Contingent Threat Situation. We argue that the crucial problem of expectations on the counterdeviations following a deviation can be addressed by defining ''coalitional strategies'' and studying the equilibrium of the extended game. Journal of Economic Literature Classification Numbers: C70, C71. (C) 1997 Academic Press.