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Sequential Formation of Coalitions through Bilateral Agreements

  • Inés Macho-Stadler
  • David Pérez-Castrillo
  • Nicolás Porteiro

We study a sequential protocol of endogenous coalition formation based on a process of bilateral agreements among the players. We apply the game to a Cournot environment with linear demand and constant average costs. We show that the final outcome of any Subgame Perfect Equilibrium of the game is the grand coalition, provided the initial number of firms is high enough and they are sufficiently patient.

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Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 84.

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Date of creation: Sep 2003
Date of revision:
Handle: RePEc:bge:wpaper:84
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  1. Nilssen, T. & Sogard, L., 1995. "Sequential Horizontal Mergers," Papers 04-95, Norwegian School of Economics and Business Administration-.
  2. DIAMANTOUDI, Effrosyni & XUE, Licun, 2002. "Coalitions, agreements and efficiency," CORE Discussion Papers 2002047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Debraj Ray & Rajiv Vohra, 1998. "A Theory of Endogenous Coalition Structures," Working Papers 98-1, Brown University, Department of Economics, revised Jan 1998.
  4. Seidmann, Daniel J & Winter, Eyal, 1998. "A Theory of Gradual Coalition Formation," Review of Economic Studies, Wiley Blackwell, vol. 65(4), pages 793-815, October.
  5. Kamien, Morton I & Zang, Israel, 1990. "The Limits of Monopolization through Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 465-99, May.
  6. Sergiu Hart & Andreu Mas-Colell, 1994. "Bargaining and value," Economics Working Papers 114, Department of Economics and Business, Universitat Pompeu Fabra, revised Feb 1995.
  7. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, July.
  8. Okada, Akira, 1996. "A Noncooperative Coalitional Bargaining Game with Random Proposers," Games and Economic Behavior, Elsevier, vol. 16(1), pages 97-108, September.
  9. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
  10. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May.
  11. repec:fth:tilbur:99121 is not listed on IDEAS
  12. Gautam Gowrisankaran & Thomas J. Holmes, 2002. "Do Mergers Lead to Monopoly in the Long Run? Results from the Dominant Firm Model," NBER Working Papers 9151, National Bureau of Economic Research, Inc.
  13. Chatterjee, Kalyan & Bhaskar Dutta & Debraj Ray & Kunal Sengupta, 1993. "A Noncooperative Theory of Coalitional Bargaining," Review of Economic Studies, Wiley Blackwell, vol. 60(2), pages 463-77, April.
  14. Montero, M.P., 1999. "Coalition Formation in Games with Externalities," Discussion Paper 1999-121, Tilburg University, Center for Economic Research.
  15. Gul, Faruk, 1989. "Bargaining Foundations of Shapley Value," Econometrica, Econometric Society, vol. 57(1), pages 81-95, January.
  16. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, June.
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