Negotiation-proof Nash equilibrium

This paper defines “negotiation-proof Nash equilibrium”, a notion that applies to environments where players can negotiate openly and directly prior to the play of a noncooperative game. It recognizes the possibility that a group of self-interested players may choose to coordinate, nonbindingly and voluntarily, their choice of strategies and make a joint objection, and it takes the perfect foresight of rational players fully into account. The merit of the notion of negotiation-proof Nash equilibrium is twofold: (1) It resolves the nestedness and myopia embedded in the notion of coalition-proof Nash equilibrium. (2) The negotiation process, which is formalized by a “graph”, serves as a natural extension to approach that models pre-play communication by an extensive form game. Journal of Economic Literature Classification Numbers: 022, 025.