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Coalition formation in games with externalities

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Author Info
Montero, M. (Tilburg University, Center for Economic Research)

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Abstract

This paper studies an extensive form game of coalition formation with random proposers in a situation where coalitions impose externalities on other players. It is shown that an agreement will be reached without delay provided that any set of coalitions profit from merging. Even under this strong condition, the formation of the grand coalition is not guaranteed. Therefore, the resulting coalition structure will not necessarily be efficient. The results of this model are compared with the related work of Ray and Vohra (GEB, 1999), which assumes that players move in a predetermined order. The game with random proposers tends to give a large advantage to the proposer, whereas the game with a rule of order tends to favour the responders and may not capture the competition between players. The game with random proposers yields more efficient results for some specific classes of games. However, the results of the two games cannot be ranked in general in terms of efficiency.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 121.

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Date of creation: 1999
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Handle: RePEc:dgr:kubcen:1999121

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Related research
Keywords: coalition;

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Find related papers by JEL classification:
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Okada, Akira, 1996. "A Noncooperative Coalitional Bargaining Game with Random Proposers," Games and Economic Behavior, Elsevier, vol. 16(1), pages 97-108, September. [Downloadable!] (restricted)
  2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January. [Downloadable!] (restricted)
  3. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer. [Downloadable!] (restricted)
  4. Yukihiko Funaki & Takehiko Yamato, 1999. "The core of an economy with a common pool resource: A partition function form approach," International Journal of Game Theory, Springer, vol. 28(2), pages 157-171. [Downloadable!] (restricted)
  5. Chatterjee, Kalyan & Bhaskar Dutta & Debraj Ray & Kunal Sengupta, 1993. "A Noncooperative Theory of Coalitional Bargaining," Review of Economic Studies, Blackwell Publishing, vol. 60(2), pages 463-77, April. [Downloadable!] (restricted)
  6. Ray, Debraj & Vohra, Rajiv, 1999. "A Theory of Endogenous Coalition Structures," Games and Economic Behavior, Elsevier, vol. 26(2), pages 286-336, January. [Downloadable!] (restricted)
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  7. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Geoffroy de Clippel & Roberto Serrano, 2008. "Bargaining, Coalitions and Externalities: a Comment on Maskin," Working Papers 2008-16, Brown University, Department of Economics. [Downloadable!]
    Other versions:
  2. Geoffroy de Clippel & Roberto Serrano, 2007. "Marginal contributions and externalities in the value," Working Papers 2007-04, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales. [Downloadable!]
    Other versions:
  3. Roberto Serrano, 2004. "Fifty Years of the Nash Program, 1953-2003," Working Papers 2004-20, Brown University, Department of Economics. [Downloadable!]
    Other versions:
  4. Francis Bloch & Armando Gomes, 2004. "Contracting with Externalities and Outside Options," Working Papers 2004.78, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  5. Montero, M., 2001. "The nucleolus as a consistent power index in noncooperative majority games," Discussion Paper 39, Tilburg University, Center for Economic Research. [Downloadable!]
  6. Carraro, Carlo & Marchiori, Carmen & Sgobbi, Alessandra, 2005. "Advances in negotiation theory : bargaining, coalitions, and fairness," Policy Research Working Paper Series 3642, The World Bank. [Downloadable!]
    Other versions:
  7. P. Manzini & C. Ponsati, 2006. "Stakeholder bargaining games," International Journal of Game Theory, Springer, vol. 34(1), pages 67-77, April. [Downloadable!] (restricted)
  8. Inés Macho-Stadler & David Pérez-Castrillo & Nicolás Porteiro, 2006. "Sequential Formation of Coalitions through Bilateral Agreements in a Cournot Setting," Working Papers 06.01, Universidad Pablo de Olavide, Department of Economics. [Downloadable!]
    Other versions:
  9. Inés Macho-Stadler & David Pérez-Castrillo & Nicol? Porteiro, 2002. "Sequential Formation of Coalitions through Bilateral Agreements," UFAE and IAE Working Papers 515.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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