So why, despite these advantages, is cooperative game theory currently dominated by noncooperative theory as applied to economics? Perhaps one answer is that the characteristic function, by assumption, rules out externalities—situations in which a coalition’s payoff depends on what other coalitions are doing. Yet, interactions between coalitions are at the very heart of economics, e.g., bargaining between unions and management, competition between companies, and trade between nations.
I found a paper that explains why:
One, that is an interesting paper and I am considering hunting for other papers which cite it.
Two, I greatly appreciate that you came back to a 10y post to provide updates. Strong upvote.