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Potential Maximization And Coalition Government Formation

Author

Listed:
  • ROD GARRATT

    (University of California, Santa Barbara, Department of Economics, Santa Barbara, CA 93106, USA)

  • JAMES E. PARCO

    (United States Air Force Academy, Department of Management, Colorado Springs, CO 80840, USA)

  • CHENG-ZHONG QIN

    (University of California, Santa Barbara, Department of Economics, Santa Barbara, CA 93106, USA)

  • AMNON RAPOPORT

    (University of Arizona, Department of Management and Policy, Tucson, AZ 85721, USA;
    Department of Economics, Hong Kong University of Science and Technology, China)

Abstract

A model of coalition government formation is presented in which inefficient, non-minimal winning coalitions may form in Nash equilibrium. Predictions for five games are presented and tested experimentally. The experimental data support potential maximization as a refinement of Nash equilibrium. In particular, the data support the prediction that non-minimal winning coalitions occur when the distance between policy positions of the parties is small relative to the value of forming the government. These conditions hold in games 1, 3, 4 and 5, where subjects played their unique potential-maximizing strategies 91, 52, 82 and 84 percent of the time, respectively. In the remaining game (Game 2) experimental data support the prediction of a minimal winning coalition. Players A and B played their unique potential-maximizing strategies 84 and 86 percent of the time, respectively, and the predicted minimal-winning government formed 92 percent of the time (all strategy choices for player C conform with potential maximization in Game 2). In Games 1, 2, 4 and 5 over 98 percent of the observed Nash equilibrium outcomes were those predicted by potential maximization. Other solution concepts including iterated elimination of weakly dominated strategies and strong/coalition-proof Nash equilibrium are also tested.

Suggested Citation

  • Rod Garratt & James E. Parco & Cheng-Zhong Qin & Amnon Rapoport, 2005. "Potential Maximization And Coalition Government Formation," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 7(04), pages 407-429.
  • Handle: RePEc:wsi:igtrxx:v:07:y:2005:i:04:n:s0219198905000612
    DOI: 10.1142/S0219198905000612
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    References listed on IDEAS

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    1. J. Keith Murnighan & Alvin E. Roth, 1977. "The Effects of Communication and Information Availability in an Experimental Study of a Three-Person Game," Management Science, INFORMS, vol. 23(12), pages 1336-1348, August.
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    Cited by:

    1. Amegashie, J. Atsu & Cadsby, C. Bram & Song, Yang, 2007. "Competitive burnout: Theory and experimental evidence," Games and Economic Behavior, Elsevier, vol. 59(2), pages 213-239, May.

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    More about this item

    Keywords

    Coalition formation; potential maximization; Nash equilibrium refinements; experimental study; minimal winning; JEL Classification: C72; JEL Classification: C78; JEL Classification: D72;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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