Bilateral Bargaining and Decision Power

Simple games are n-player cooperative games in which each subset of players can be classified as either a winning coalition or a losing coalition. They can be used to model economic or political decision bodies like parliaments or shareholder meetings in which proposals are either passed or rejected. Power indices are functions that map n-person simple games to n-dimensional real vectors. They assign to each player a number that indicates the player’s a priori power to shape events, and they have been applied to evaluate numerous political and economic institutions in practice. Power distributions in the context of shareholders’ meetings have been one focus of attention, with the theoretical challenge of accounting for cross-ownership (see e. g. Leech 1988 and Gambarelli and Owen 1994). In the political sphere, decision making in the U.S. Congress, U. S. presidential elections, the U. N. Security Council, and the institutions of the European Union have all been studied extensively using power indices1. Power measurement techniques have played an important role in the discussion of institutional amendments in preparation of an enlargement of the European Union at the Nice 2000 summit (see e. g. The Economist, November 25th 2000, p. 126).