Non-cooperative implementation of the nucleolus: The 3-player case (Q1313361)

This paper continues the tradition of the Nash program by exploring a negotiation mechanism that is capable of implementing the nucleolus of a superadditive 3-player characteristic function game. The mechanism is an infinite alternating-offer bargaining scheme with exit and outside options, which is modelled as a noncooperative game in extensive form with almost perfect information. There is no discounting; rather, the cost of delay is incorporated as a fixed cost of bargaining that only the proposer must pay. The noncooperative game has a unique Markov perfect equilibrium that yields the prenucleolus and therefore, by superadditivity, the nucleolus of the cooperative game if the order of proposers corresponds to the power attributed to players by the characteristic function. The result cannot be extended to more than three players.