Co-opetition in Financial Markets - Rational Benchmarks, Behavioral Implementability, and Coordination

Background - Financial market interactions often combine rivalry with interdependence: counterparties compete for margins, order flow, and informational advantage while relying on shared infrastructure, standards, clearing, and liquidity conventions. This creates a co- opetitive setting in which cooperation expands feasible outcomes and competition or convention selects a surplus division. Aim - This paper formalizes co-opetition in financial markets as a two-layer bargaining structure in which cooperation expands the feasible bargaining set S (through infrastructure, standards, clearing, and admissible information-sharing), while competition or convention selects an agreement on the Pareto frontier P(S). Methods - Two axiomatic bargaining solutions—the Nash solution (NS) and the Kalai– Smorodinsky solution (K–S)—are used as replicable rational benchmarks. Convex bargaining environments are compared with regime-type nonconvex environments, and the behavioral layer is expressed through an implementability criterion based on proportional asymmetry. Results - In convex settings, NS and K–S provide alternative benchmark selections that differ in product efficiency and proportionality. In regime-nonconvex settings, Pareto efficiency alone does not determine the branch on which coordination should occur; the K–S ray-intersection is therefore interpreted as a publicly readable focal candidate for regime selection. Conclusions - The paper does not claim an empirical proof of market-wide behavioral stability. Instead, it formulates behavioral implementability as a testable coordination condition - under regime nonconvexity and repeated or reputational interaction, observed agreements are expected to be closer to proportional K–S-like selections than to product- efficient extremes. A minimal observational, structural, and experimental verification strategy is outlined.