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Do coalitions matter in designing institutions?

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  • Korpela, Ville
  • Lombardi, Michele
  • Vartiainen, Hannu

Abstract

In this paper, we re-examine the classical questions of implementation theory under complete information in a setting where coalitions are fundamental behavioral units, and the outcomes of their interactions are predicted by applying the solution concept of the core. The planner's exercise includes designing a code of rights that specifies the collection of coalitions having the right to block one outcome by moving to another. A code of individual rights is a code of rights in which only unit coalitions may have blocking powers. We provide the necessary and sufficient conditions for implementation (under core equilibria) by codes of rights, as well as by codes of individual rights. We also show that these two modes of implementation are not equivalent. The results are robust and extend to alternative notions of core, such as an externally stable core. Therefore, coalitions are shown to bring value added to institutional design. The characterization results address the limitations that restrict the relevance of the existing implementation theory.

Suggested Citation

  • Korpela, Ville & Lombardi, Michele & Vartiainen, Hannu, 2020. "Do coalitions matter in designing institutions?," Journal of Economic Theory, Elsevier, vol. 185(C).
    • Handle: RePEc:eee:jetheo:v:185:y:2020:i:c:s0022053119301036
    DOI: 10.1016/j.jet.2019.104953
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    Cited by:

    1. Guo, Huiyi & Yannelis, Nicholas C., 2022. "Robust coalitional implementation," Games and Economic Behavior, Elsevier, vol. 132(C), pages 553-575.
    2. Korpela, Ville & Lombardi, Michele & Vartiainen, Hannu, 2019. "Implementation with foresighted agents," MPRA Paper 102496, University Library of Munich, Germany.
    3. Gonzalez, Stéphane & Lardon, Aymeric, 2021. "Axiomatic foundations of the core for games in effectiveness form," Mathematical Social Sciences, Elsevier, vol. 114(C), pages 28-38.
    4. Savva, Foivos, 2021. "Motives and implementation with rights structures," Economics Letters, Elsevier, vol. 204(C).
    5. Korpela, Ville & Lombardi, Michele & Vartiainen, Hannu, 2021. "Implementation in largest consistent set via rights structures," Games and Economic Behavior, Elsevier, vol. 128(C), pages 202-212.
    6. Korpela, Ville & Lombardi, Michele, 2019. "Mechanism design with farsighted agents," MPRA Paper 94436, University Library of Munich, Germany.
    7. Michele Lombardi & Foivos Savva & Nikolas Zivanas, 2023. "Implementation in strong core by codes of rights," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 60(3), pages 503-515, April.

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    More about this item

    Keywords

    Implementation theory; Core; Rights structure;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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