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Stochastic stability under logit choice in coalitional bargaining problems

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  • Sawa, Ryoji

Abstract

This study examines a dynamic process of n-person coalitional bargaining problems. We investigate the evolution of social conventions by embedding a coalitional bargaining setting in a dynamic process. In each period, a group of players may make some coalitional move, that is, forming a new team or negotiating the division of a surplus. Players revise their coalitions and surplus divisions over time in the presence of stochastic noise, which leads players to make a suboptimal decision. Under a logit specification of choice probabilities, we find that the stability of a core allocation decreases in the wealth of the richest player. Furthermore, stochastically stable allocations are core allocations that minimize the wealth of the richest player.

Suggested Citation

  • Sawa, Ryoji, 2019. "Stochastic stability under logit choice in coalitional bargaining problems," Games and Economic Behavior, Elsevier, vol. 113(C), pages 633-650.
  • Handle: RePEc:eee:gamebe:v:113:y:2019:i:c:p:633-650
    DOI: 10.1016/j.geb.2018.11.009
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    More about this item

    Keywords

    Stochastic stability; Coalitional bargaining; Coalition; Logit-response dynamics; Bargaining;
    All these keywords.

    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
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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