A bargaining set for monotonic simple games based on external and internal stability

A new bargaining set based on notions of both internal and external stability is developed in the context of endogenous coalition formation. It allows one to make an explicit distinction between within‐group and outside‐group deviation options. This type of distinction is not present in current bargaining sets. For the class of monotonic proper simple games, the outcomes in the bargaining set are characterized. Furthermore, it is shown that the bargaining set of any homogeneous weighted majority game contains an outcome for which the underlying coalition structure consists of a minimal winning coalition and its complement.