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Coalitional stability under perfect foresight


  • Licun Xue

    (Department of Economics, University of Aarhus, DK-8000 Aarhus C, DENMARK)


We analyze strategic social environments where coalitions can form through binding or nonbinding agreements and actions of a coalition may impose externalities upon the welfare of the rest of the players. We define a solution concept that (1) captures the perfect foresight of the players that has been overlooked in the literature (e.g., Harsanyi [10] and Chwe [6]) and (2) identifies the coalitions that are likely to form and the "stable" outcomes that will not be replaced by any coalition of rational (and hence farsighted) players. The proposed solution concept thereby offers a notion of agreements and coalition formation in complex social environments.

Suggested Citation

  • Licun Xue, 1998. "Coalitional stability under perfect foresight," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 603-627.
  • Handle: RePEc:spr:joecth:v:11:y:1998:i:3:p:603-627
    Note: Received: February 12, 1996; revised version: March 3, 1997

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