We propose and analyze a new solution concept, the R solution, for three-person, transferable utility, cooperative games. In the spirit of the Nash Bargaining Solution, our concept is founded on the predicted outcomes of simultaneous, two-party negotiations that would be the alternative to the grand coalition. These possibly probabilistic predictions are based on consistent beliefs. We analyze the properties of the R solution and compare it with the Shapley value and other concepts. The R solution exists and is unique. It belongs to the bargaining set and to the core whenever the latter is not empty. In fact, when the grand coalition can simply execute one of the three possible bilateral trades, the R solution is the most egalitarian selection of the bargaining set. Finally, we discuss how the R solution changes important conclusions of several well known Industrial Organization models.

Publicado también como: Barcelona GSE Working Paper Series nº 521. Barcelona: Barcelona Graduate School of Economics, September 2011 (November 2010)

JEL classification numbers: C71, C78, L14.-- Trabajo presentado a la "11th SAET Conference" celebrada en Portugal en 2011.

Barcelona GSE, Generalitat de Catalunya, and Spanish Ministry of Sci- ence and Innovation (project ECO2008-01850).

Peer reviewed