Dynamic Coalition Formation and the Core
AbstractThis paper presents a dynamic model of endogenous coalition formation in cooperative games with transferable utility. The players are boundedly rational. At each time step, a player decides which of the existing coalitions to join, and demands a payoff. These decisions are determined by a (non- cooperative) best-reply rule, given the coalition structure and allocation in the previous period. We show that absorbing states of the process exist if the game is essential. Further, if the players are allowed to experiment with myopically suboptimal strategies whenever there are potential gains from trade, an isomorphism between the set of absorbing states of the process and the set of core allocations can beestablished, and the process converges to one of these states with probability one whenever the core is non-empty. This result holds independently of the form of the characteristic function.
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Bibliographic InfoPaper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n810798.
Length: 16 pages
Date of creation: Jul 1998
Date of revision:
TU Games; Coalition Formation; Bounded Rationality; Core;
Find related papers by JEL classification:
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-1998-09-14 (All new papers)
- NEP-CDM-1998-09-14 (Collective Decision-Making)
- NEP-GTH-1998-09-14 (Game Theory)
- NEP-MIC-1998-09-14 (Microeconomics)
- NEP-POL-1998-09-14 (Positive Political Economics)
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