Lucas Counter Example Revisited
We revisit Lucas’(1968) counter example for the existence of von Neumann and Morgenstern (1944) stable set (solution) for coalitional games. We show that when we endow the agents with foresight, particularly, when we replace von Neumann and Morgenstern’s (1944) dominance relation with the indirect dominance relations introduced by Harsanyi (1974), Lucas’s example admits a stable set.
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- John C. Harsanyi, 1974. "An Equilibrium-Point Interpretation of Stable Sets and a Proposed Alternative Definition," Management Science, INFORMS, vol. 20(11), pages 1472-1495, July.