This paper studies coalition formation and payoff division in apex games under the following assumptions: 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). In contrast with the results of other two-stage models, all minimal winning coalitions may form and expected payoffs coincide with the per capita nucleolus. These results are robust to the details of the bargaining procedure. Surprisingly, having a two-stage process (rather than a one-stage process with simultaneous coalition formation and payoff division) benefits the apex player.
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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number
26.
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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