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Too big to prevail: Coalition formations in the presence of a superpower

Author

Listed:
  • Changxia Ke
  • Florian Morath
  • Anthony Newell
  • Lionel Page

Abstract

In this study we investigate the effect of players' power on the formation of coalitions to divide a prize when the assumption that coalition formation involves binding agreements on how to split the prize is relaxed. In our experimental setup with one powerful ('strong') player and three standard ('weak') players, we vary the strong players voting rights in one dimension and manipulate the timing of agreement and communication on the prize division in the other dimension (i.e., whether binding agreement on prize division and furthermore whether non-binding communication on prize-split intentions at the stage of coalition formation is available). We predict and find: first, with binding agreement, the results of the game and the players average payoff are (surprisingly closely) in line with the relative power of the players as measured by their Shapley value. Second, when binding agreement on the division of the prize is not possible at the stage of coalition formation, the strong player's likelihood to be part of the winning coalition and his average payoff stays high if he is not 'too strong' but it decreases significantly if his voting rights increase further. Third, communication at the coalition formation stage mitigates this negative effect of the absence of binding agreements for powerful players.

Suggested Citation

  • Changxia Ke & Florian Morath & Anthony Newell & Lionel Page, 2016. "Too big to prevail: Coalition formations in the presence of a superpower," QuBE Working Papers 044, QUT Business School.
  • Handle: RePEc:qut:qubewp:wp044
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    File URL: http://external-apps.qut.edu.au/business/documents/QuBEWorkingPapers/2016/Coalition.pdf
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    References listed on IDEAS

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    1. Barr, Jason & Passarelli, Francesco, 2009. "Who has the power in the EU?," Mathematical Social Sciences, Elsevier, vol. 57(3), pages 339-366, May.
    2. Ray, Debraj, 2007. "A Game-Theoretic Perspective on Coalition Formation," OUP Catalogue, Oxford University Press, number 9780199207954.
    3. Guillaume Fréchette & John H. Kagel & Massimo Morelli, 2005. "Behavioral Identification in Coalitional Bargaining: An Experimental Analysis of Demand Bargaining and Alternating Offers," Econometrica, Econometric Society, vol. 73(6), pages 1893-1937, November.
    4. Maria Montero & Martin Sefton & Ping Zhang, 2008. "Enlargement and the balance of power: an experimental study," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 30(1), pages 69-87, January.
    5. Daron Acemoglu & Georgy Egorov & Konstantin Sonin, 2008. "Coalition Formation in Non-Democracies," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 987-1009.
    6. Heikki Kauppi & Mika Widgrén, 2004. "What determines EU decision making? Needs, power or both?," Economic Policy, CEPR;CES;MSH, vol. 19(39), pages 221-266, July.
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    9. Geller, Chris & Mustard, Jamie & Shahwan, Ranya, 2007. "Focused power: experimental manifestation of the Shapley-Shubik Power Index," Working Papers eco_2007_13, Deakin University, Department of Economics.
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    12. David P. Baron & Daniel Diermeier, 2001. "Elections, Governments, and Parliaments in Proportional Representation Systems," The Quarterly Journal of Economics, Oxford University Press, vol. 116(3), pages 933-967.
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    More about this item

    Keywords

    Shapley Value; (Non) Binding Agreement; Balance of Power; Communication;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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