Contractually stable alliances
AbstractWe analyze how different rules for exiting an alliance (simple majority, unanimity or unanimity with side payments) will affect the formation of strategic alliances. We find that no alliance structure is contractually stable under the simple majority rule. Once unanimous consent is required, asymmetric alliance structures consisting of two alliances are contractually stable. In addition, the grand alliance which is the efficient structure is stable. Allowing for side payments to compensate former partners improves efficiency. Finally, we show that different rules of exit may coexist in different alliances in the long run.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2013031.
Date of creation: 09 Jul 2013
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strategic alliances; coalition formation; contractual stability; exit rules;
Find related papers by JEL classification:
- C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-28 (All new papers)
- NEP-CDM-2013-09-28 (Collective Decision-Making)
- NEP-GTH-2013-09-28 (Game Theory)
- NEP-MIC-2013-09-28 (Microeconomics)
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