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Group formation: The interaction of increasing returns and preferences' diversity

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  • Gabrielle Demange

Abstract

In a large range of political and economic situations, group formation is driven by two opposite forces : increasing returns to size and to coordination on the one hand, heterogeneity of preferences on the other. An important question is whether competitive pressures, such as described by free mobility and free entry, lead to an efficient and organization of the society into possibly several self-sufficient groups. This chapter reviews some answers to this question, positive and negative, identifies the role of some crucial features, and discusses some difficulties linked with negative externalities and adverse selection. The sustainability of an oligopoly under increasing returns to scale and competition among jurisdictions are two prominent domains of application.

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Bibliographic Info

Paper provided by DELTA (Ecole normale supérieure) in its series DELTA Working Papers with number 2004-30.

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Date of creation: 2004
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Handle: RePEc:del:abcdef:2004-30

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  1. Guesnerie, Roger & Oddou, Claude, 1988. " Increasing Returns to Size and Their Limits," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(3), pages 259-73.
  2. Guillaume Haeringer, 2000. "Stable Coalition Structures with Fixed Decision Schme," UFAE and IAE Working Papers 471.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Mamoru Kaneko & Myrna Holtz Wooders, 1982. "Cores of Partitioning Games," Cowles Foundation Discussion Papers 620, Cowles Foundation for Research in Economics, Yale University.
  4. Guesnerie Roger & Oddou Claude, 1979. "Second best taxation as a game," CEPREMAP Working Papers (Couverture Orange) 7919, CEPREMAP.
  5. Yi, Sang-Seung, 1997. "Stable Coalition Structures with Externalities," Games and Economic Behavior, Elsevier, vol. 20(2), pages 201-237, August.
  6. Jehiel, Philippe & Scotchmer, Suzanne, 2001. "Constitutional Rules of Exclusion in Jurisdiction Formation," Review of Economic Studies, Wiley Blackwell, vol. 68(2), pages 393-413, April.
  7. Greenberg, J. & Weber, S., 1991. "Stable Coalition Structures with Unidimensional Set of Alternatives," Papers 9133, Tilburg - Center for Economic Research.
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Cited by:
  1. Sun, N. & Trockel, W. & Yang, Z.F., 2004. "Competitive Outcomes and Endogenous Coalition Formation in an n-Person Game," Discussion Paper 2004-93, Tilburg University, Center for Economic Research.
  2. Gabrielle Demange, 2009. "Sharing information in web communities," PSE Working Papers halshs-00586656, HAL.
  3. Page Jr., Frank H. & Wooders, Myrna, 2007. "Networks and clubs," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 406-425.

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