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Coalitional stochastic stability

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  • Newton, Jonathan

Abstract

This paper takes the idea of coalitional behavior – groups of people occasionally acting together to their mutual benefit – and incorporates it into the framework of evolutionary game theory that underpins the social learning literature. An equilibrium selection criterion is defined which we call coalitional stochastic stability (CSS). This differs from existing work on stochastic stability in that profitable coalitional deviations are given greater importance than unprofitable single player deviations. A general characterization of CSS is given together with more detailed characterizations for specific classes of games. Applications include contracting, asymmetric social norms and collusive price setting, the latter of which is shown in some circumstances to facilitate competitive outcomes.

Suggested Citation

  • Newton, Jonathan, 2012. "Coalitional stochastic stability," Games and Economic Behavior, Elsevier, vol. 75(2), pages 842-854.
  • Handle: RePEc:eee:gamebe:v:75:y:2012:i:2:p:842-854
    DOI: 10.1016/j.geb.2012.02.014
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    More about this item

    Keywords

    Stochastic stability; Learning; Coalition; Lexicographic; Contract;
    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

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