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In many environments, agents form agreements that have externalities
or are multilateral, and may view some agreements as substitutable
and others as complementary. This paper presents an
approach that ensures the existence of stable outcomes in any environment,
including those with arbitrary externalities, preferences,
and market structures. It does so by endogenizing the agents’
choice functions while employing the standard stability concept.
Instead of assuming that each agent chooses their favorite set of
contracts, we require agents to choose optimally given correct beliefs
about the choices of others, and show that stable outcomes are
uniquely pinned down by those beliefs.
