Potential Maximization and Coalition Government Formation
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 dominated strategies and strong/coalition proof Nash equilibrium are also tested.
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- Roger B. Myerson, 1976. "Graphs and Cooperation in Games," Discussion Papers 246, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Slikker, M. & Dutta, B. & Tijs, S.H. & van den Nouweland, C.G.A.M., 2000.
"Potential maximizers and network formation,"
Other publications TiSEM
a4848315-a441-4d55-acde-9, Tilburg University, School of Economics and Management.
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- Slikker, Marco, 2001.
"Coalition Formation and Potential Games,"
Games and Economic Behavior,
Elsevier, vol. 37(2), pages 436-448, November.
- repec:ebl:ecbull:v:3:y:2003:i:5:p:1-9 is not listed on IDEAS
- repec:ebl:ecbull:v:3:y:2003:i:12:p:1-11 is not listed on IDEAS
- Qin, Cheng-Zhong, 1996. "Endogenous Formation of Cooperation Structures," Journal of Economic Theory, Elsevier, vol. 69(1), pages 218-226, April.
- 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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