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Rational bargaining in games with coalitional externalities

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  • Borm, Peter
  • Ju, Yuan
  • Wettstein, David

Abstract

This paper provides a flexible strategic framework to analyze bargaining and values in environments with coalitional externalities. Within this framework we propose a new value that extends the Shapley value to partition function form games, the so-called Rational Belief Shapley (RBS) value. We investigate the strategic foundation of the RBS value by constructing an implementation mechanism. This mechanism extends existing models of multilateral bargaining by allowing players a higher degree of freedom to form coalitions. The same framework of bidding and renegotiation allows for natural variations of the RBS-mechanism. In this way, alternative “Shapley-like” values are obtained, and a unified platform to analyze and compare these solutions is provided.

Suggested Citation

  • Borm, Peter & Ju, Yuan & Wettstein, David, 2015. "Rational bargaining in games with coalitional externalities," Journal of Economic Theory, Elsevier, vol. 157(C), pages 236-254.
  • Handle: RePEc:eee:jetheo:v:157:y:2015:i:c:p:236-254
    DOI: 10.1016/j.jet.2015.01.011
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    References listed on IDEAS

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    Cited by:

    1. Ines Macho-Stadler & David Perez-Castrillo & David Wettstein, 2017. "Extensions Of The Shapley Value For Environments With Externalities," Working Papers 1716, Ben-Gurion University of the Negev, Department of Economics.

    More about this item

    Keywords

    Externalities; Bargaining; Partition function form game; Rational belief Shapley value; Implementation; Bidding mechanism;

    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
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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