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Contractually stable alliances

  • MAULEON, Ana

    ()

    (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium)

  • SEMPERE-MONERRIS, Jose

    ()

    (Department of Economic Analysis and ERI-CES, University of Valencia, Spain; Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

  • VANNETELBOSCH, Vincent

    ()

    (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium)

We analyze how different rules for exiting an alliance (simple majority, unanimity or unanimity with side payments) will affect the formation of strategic alliances. We find that no alliance structure is contractually stable under the simple majority rule. Once unanimous consent is required, asymmetric alliance structures consisting of two alliances are contractually stable. In addition, the grand alliance which is the efficient structure is stable. Allowing for side payments to compensate former partners improves efficiency. Finally, we show that different rules of exit may coexist in different alliances in the long run.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2013031.

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Date of creation: 09 Jul 2013
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Handle: RePEc:cor:louvco:2013031
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