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Formation of Collective Decision-Making Units: Stability and a Solution

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  • Fan-chin Kung

    (Academia Sinica)

Abstract

We study how individuals divide themselves into coalitions and choose a public alternative for each coalition. When preferences have consecutive support and coalition feasible sets are positively population- responsive, the proposed consecutive benevolence solution generates allocations belonging to the coalition structure core and that are also Tiebout equilibria. However, when each coalition follows a single-valued collective decision rule, the coalition structure core may be empty. Our results show that if individual preferences are, in a sense, similar and if members can be as well off when a coalition enlarges, then a stable formation of collective decision-making units can be guaranteed. A predetermined decision rule makes coalitions less stable.

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Bibliographic Info

Paper provided by EconWPA in its series Game Theory and Information with number 0505002.

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Length: 25 pages
Date of creation: 05 May 2005
Date of revision: 21 Jun 2005
Handle: RePEc:wpa:wuwpga:0505002

Note: Type of Document - pdf; pages: 25
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Cited by:
  1. Fan-Chin Kung, 2006. "An Algorithm for Stable and Equitable Coalition Structures with Public Goods," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 8(3), pages 345-355, 08.
  2. Fan-chin Kung, 2005. "Coalition Formation with Local Public Goods and Network Effect," Game Theory and Information 0506007, EconWPA.

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