A Simple Noncooperative Core Story

Abstract

What are the strategic properties of the core? We address this question by considering mechanisms that emulate the "no recontracting out" property of the core. In particular, mechanisms are defined relative to a status quo outcome that serves as a disagreement point if no coalition forms to "recontract out." We then ask the question: What is a plausible class of such mechanisms for which the following result is valid. (*) A core outcome is a status quo equilibrium outcome of every mechanism in this class; a noncore outcome is a status quo equilibrium outcome of no mechanism in this class. A class of mechanisms satisfying (*) is said to strategically separate core from noncore outcomes. This paper finds one such class (a "noncooperative core story") having the property that agents can explicitly communicate their preferences for association. Journal of Economic Literature Classification Numbers: 030, 022, 025, 026. © 1994 Academic Press. All rights reserved.