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Coalitions, Agreements and Efficiency

Author

Listed:
  • Effrosyni Diamantoudi
  • Licun Xue

    (Department of Economics, University of Aarhus, Denmark)

Abstract

If agents negotiate openly and form coalitions, can they reach efficient agreements? We address this issue within a class of coalition formation games with externalities where agents' preferences depend solely on the coalition structures they are associated with. We derive Ray and Vohra's (1997) notion of equilibrium binding agreements using von Neumann and Morgenstern abstract stable set and then extend it to allow for arbitrary coalitional deviations (as opposed to nested deviations assumed originally). We show that, while the new notion facilitates the attainment of efficient agreements, inefficient agreements can nevertheless arise

Suggested Citation

  • Effrosyni Diamantoudi & Licun Xue, "undated". "Coalitions, Agreements and Efficiency," Economics Working Papers 2002-9, Department of Economics and Business Economics, Aarhus University.
    • Handle: RePEc:aah:aarhec:2002-9
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    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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