In this chapter the theory of social situations is applied to the simplest of the three types of games – games in characteristic function form (known also as cooperative games). Several possible ways to represent such games as situations will be suggested. As in the procedural voting-by-veto model (Example 3.6), this demonstrates that the description of a social environment as a cooperative game is incomplete. It omits some essential information. I shall argue that a cooperative game specifies the power coalitions have if and when they form, but it is totally silent on the crucial issue of how exactly this power can be used. (As every card player knows, the distribution of the cards does not, in itself, suffice to determine the course of the game; it is important to know how the “hands” are played.)

The representation of a cooperative game as a situation forces us to address, among other issues, the following two fundamental questions in the theory of coalition formation:

1. C.1. What, in fact, is the meaning of forming a coalition – is it a binding commitment of the players to remain and never leave a coalition once it forms, or is it merely a “declaration of intentions” which can be revised?

2. C.2. Do players first form a coalition and only then discuss their payoff there, or are the two decisions made simultaneously?

We shall see that two of the most important game-theoretic solution concepts for cooperative games – the core and the vN&M solution – can be regarded as stemming from the way (C.I) and (C.2) are answered.