How do coalitions get built - Evidence from an extensive form coalition game with renegotiation & externalities
AbstractWe investigate a three-person coalition game in which one bargainer, the builder, can propose and build a coalition over two stages. In equilibrium, coalition building ends with an efficient grand coalition, while the equilibrium path is contingent on the values of the two-person coalitions and associated externality payoffs. Considering relative payoffs need not change the equilibrium path. Nevertheless, outcomes in the experiment are often inefficient. One explanation is that bargainers have difficulties anticipating the future actions of other bargainers. This problem might be mitigated by allowing bargainers to communicate prior to each stage. A test finds that communication does in fact increase efficiency, although unevenly, and at the cost of the builder. The study implies that the nature and pattern of communication among bargainers is a critical factor in efficient coalition building.
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Bibliographic InfoPaper provided by University of Cologne, Department of Economics in its series Working Paper Series in Economics with number 30.
Date of creation: 06 Mar 2007
Date of revision:
coalitional bargaining; communication; game theory; experiment;
Find related papers by JEL classification:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- C9 - Mathematical and Quantitative Methods - - Design of Experiments
- D7 - Microeconomics - - Analysis of Collective Decision-Making
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-10 (All new papers)
- NEP-CBE-2007-03-10 (Cognitive & Behavioural Economics)
- NEP-EXP-2007-03-10 (Experimental Economics)
- NEP-GTH-2007-03-10 (Game Theory)
- NEP-POL-2007-03-10 (Positive Political Economics)
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