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To generalize the standard solution for 2-person TU games into n-person cases, this paper introduces a recursive two-sided negotiation process to establish cooperation between all players. This leads to a new solution concept for cooperative games: the consensus value. An explicit comparison with the Shapley value is provided, also at the axiomatic level. Moreover, a class of possible generalizations of the consensus value is introduced and axiomatized with the Shapley value at one end and the equal surplus solution at the other. Finally, we discuss a non-cooperative mechanism which implements the consensus value.

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We consider an economy in which agents are embedded in a network of potential value-generating relationships. Agents are assumed to be able to participate in three types of economic interactions: Autarkic self-provision; bilateral interaction; and multilateral collaboration through endogenously provided platforms.We introduce two stability concepts and provide su cient and necessary conditions on the network structure that guarantee existence, in cases of the absence of externalities, link-based externalities and crowding externalities. We show that institutional arrangements based on socioeconomic roles and leadership guarantee stability. In particular, the stability of more complex economic outcomes requires more strict and complex institutional rules to govern economic interactions. We investigate strict social hierarchies, tiered leadership structures and global market places.Keywords: Network economies; Bilateral and multilateral interaction; Stable outcomes; Institutional stability.JEL codes: C72, D71, D85 * is paper has bene ted from the constructive comments of two anonymous referees. We also thank Gerard van der Laan, Graham Brownlow, Owen Sims and Dimitrios Diamantaras for insightful comments on earlier dra s of this paper. Also, we recognize the Netherlands Organization for Scienti c Research (NWO) for nancial support to make this research possible. †

Yang's theory of economic specialization under increasing returns to scale (Yang 2001) is a formal development of the fundamental Smith-Young theorem on the extent of the market and the social division of labor. In this theory specializationand, thus, the social division of labor-is firmly embedded within a system of perfectly competitive markets. This leaves unresolved whether and how such development processes are possible in economies based on more primitive, nonmarket organizations. In this paper we introduce a general relational model of economic interaction. Within this non-market environment we discuss the emergence of economic specialization and ultimately of economic trade and a social division of labor. We base our approach on three stages in organizational development: the presence of a stable relational structure; the presence of relational trust and subjective specialization; and, finally, the emergence of objective specialization through the social recognition of subjectively defined economic roles.