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Proportional Payoffs in Majority Games

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  • Maria Montero

    ()
    (School of Economics, University of Nottingham)

Abstract

This paper extends the Baron-Ferejohn model of legislative bargaining to general weighted majority games with two modifications: first, payoff division can only be agreed upon after the coalition has formed (two-stage bargaining); second, negotiations in the coalition can break down, in which case a new coalition may be formed (reversible coalitions). Under the most natural bargaining protocol, both expected payoffs and actual payoff division are proportional to the voting weights provided that the set of winning coalitions of minimum weight is weakly balanced and that the breakdown probability tends to 0. Homogeneity of the voting weights is neither necessary nor sufficient for proportional payoffs. Intermediate values of the breakdown probability produce predictions consistent with the empirical evidence on portfolio allocation in Europe: a moderate propoper advantage and a linear relationship between weights and ex post payoffs for all coalition members other than the proposer.

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Bibliographic Info

Paper provided by The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham in its series Discussion Papers with number 2008-03.

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Date of creation: Mar 2008
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Handle: RePEc:cdx:dpaper:2008-03

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Related research

Keywords: coalition formation; legislative bargaining; weighted majority games; proportional payoffs; reversible coalitions;

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  1. Michalis Drouvelis & Maria Montero & Martin Sefton, 2007. "The Paradox of New Members: Strategic Foundations and Experimental Evidence," Discussion Papers 2007-06, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
  2. Daniel Diermeier & Antoni Merlo, 1999. "An Empirical Investigation of Coalitional Bargaining Procedures," Discussion Papers 1267, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  3. Daniel Diermeier & Hulya Eraslan & Antonio Merlo, 2003. "A Structural Model of Government Formation," Econometrica, Econometric Society, vol. 71(1), pages 27-70, January.
  4. Chatterjee, Kalyan & Bhaskar Dutta & Debraj Ray & Kunal Sengupta, 1993. "A Noncooperative Theory of Coalitional Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 463-77, April.
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Cited by:
  1. Flavio Pressacco & Giacomo Plazzotta & Laura Ziani, 2014. "Twin relationships in Parsimonious Games: some results," Working Papers hal-00950076, HAL.

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