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Contractually Stable Alliances

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  • Christophe Bravard
  • Sudipta Sarangi
  • ANA MAULEON
  • JOSE J. SEMPERE-MONERRIS
  • VINCENT VANNETELBOSCH

Abstract

We analyze how different rules for exiting an alliance (simple majority, unanimity or unanimity with side payments) will affect the formation of strategic alliances. We find that no alliance structure is contractually stable under the simple majority rule. Once unanimous consent is required, asymmetric alliance structures consisting of two alliances are contractually stable. In addition, the grand alliance which is the efficient structure is stable. Allowing for side payments to compensate former partners improves efficiency. Finally, we show that different rules of exit may coexist in different alliances in the long run.
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Suggested Citation

  • Christophe Bravard & Sudipta Sarangi & ANA MAULEON & JOSE J. SEMPERE-MONERRIS & VINCENT VANNETELBOSCH, 2016. "Contractually Stable Alliances," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 18(2), pages 212-225, April.
  • Handle: RePEc:bla:jpbect:v:18:y:2016:i:2:p:212-225
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    File URL: http://hdl.handle.net/10.1111/jpet.2016.18.issue-2
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    Cited by:

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    4. Dollinger, Jérôme & Mauleon, Ana & Vannetelbosch, Vincent, 2023. "R&D and Market Sharing Agreements," LIDAM Discussion Papers CORE 2023004, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

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    More about this item

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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