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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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    Citations

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    Cited by:

    1. Andrea Caggese & Ander Perez, 2017. "Capital Misallocation and Secular Stagnation," Finance and Economics Discussion Series 2017-009, Board of Governors of the Federal Reserve System (U.S.).
    2. László Á. Kóczy, 2018. "Partition Function Form Games," Theory and Decision Library C, Springer, number 978-3-319-69841-0, December.
    3. J. M. Alonso-Meijide & M. Álvarez-Mozos & M. G. Fiestras-Janeiro & A. Jiménez-Losada, 2021. "Marginality and convexity in partition function form games," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 94(1), pages 99-121, August.
    4. Roberto Serrano, 2020. "Sixty-Seven Years of the Nash Program: Time for Retirement?," Working Papers 2020-20, Brown University, Department of Economics.
    5. Montero, M.P., 1999. "Coalition Formation in Games with Externalities," Discussion Paper 1999-121, Tilburg University, Center for Economic Research.
    6. Inés Macho-Stadler & David Pérez-Castrillo & David Wettstein, 2017. "Extensions of the Shapley value for Environments with Externalities," Working Papers 1002, Barcelona Graduate School of Economics.
    7. Roberto Serrano, 2021. "Sixty-seven years of the Nash program: time for retirement?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(1), pages 35-48, March.
    8. Peter Borm & Yukihiko Funaki & Yuan Ju, 2020. "The Balanced Threat Agreement for Individual Externality Negotiation Problems," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 37(1), pages 67-85, November.
    9. Peter Borm & Yukihiko Funaki & Yuan Ju, 0. "The Balanced Threat Agreement for Individual Externality Negotiation Problems," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 0, pages 1-19.

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    More about this item

    Keywords

    Externalities; Bargaining; Partition function form game; Rational belief Shapley value; Implementation; Bidding mechanism;
    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
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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