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Formation of Collective Decision-Making Units: Stability and a Solution

  • Fan-chin Kung

    (Academia Sinica)

We study how individuals divide themselves into coalitions and choose a public alternative for each coalition. When preferences have consecutive support and coalition feasible sets are positively population- responsive, the proposed consecutive benevolence solution generates allocations belonging to the coalition structure core and that are also Tiebout equilibria. However, when each coalition follows a single-valued collective decision rule, the coalition structure core may be empty. Our results show that if individual preferences are, in a sense, similar and if members can be as well off when a coalition enlarges, then a stable formation of collective decision-making units can be guaranteed. A predetermined decision rule makes coalitions less stable.

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File URL: http://128.118.178.162/eps/game/papers/0505/0505002.pdf
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Paper provided by EconWPA in its series Game Theory and Information with number 0505002.

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Length: 25 pages
Date of creation: 05 May 2005
Date of revision: 21 Jun 2005
Handle: RePEc:wpa:wuwpga:0505002
Note: Type of Document - pdf; pages: 25
Contact details of provider: Web page: http://128.118.178.162

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  1. Milgrom, P. & Shannon, C., 1991. "Monotone Comparative Statics," Papers 11, Stanford - Institute for Thoretical Economics.
  2. Demange, Gabrielle, 1994. "Intermediate preferences and stable coalition structures," Journal of Mathematical Economics, Elsevier, vol. 23(1), pages 45-58, January.
  3. Gans, Joshua S. & Smart, Michael, 1996. "Majority voting with single-crossing preferences," Journal of Public Economics, Elsevier, vol. 59(2), pages 219-237, February.
  4. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1993. "Existence of voting and housing equilibrium in a system of communities with property taxes," Regional Science and Urban Economics, Elsevier, vol. 23(5), pages 585-610, November.
  5. Rothstein, Paul, 1991. " Representative Voter Theorems," Public Choice, Springer, vol. 72(2-3), pages 193-212, December.
  6. Westhoff, Frank, 1977. "Existence of equilibria in economies with a local public good," Journal of Economic Theory, Elsevier, vol. 14(1), pages 84-112, February.
  7. Epple, Dennis & Filimon, Radu & Romer, Thomas, 1984. "Equilibrium among local jurisdictions: toward an integrated treatment of voting and residential choice," Journal of Public Economics, Elsevier, vol. 24(3), pages 281-308, August.
  8. Greenberg, Joseph, 1994. "Coalition structures," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 37, pages 1305-1337 Elsevier.
  9. Guesnerie, Roger & Oddou, Claude, 1981. "Second best taxation as a game," Journal of Economic Theory, Elsevier, vol. 25(1), pages 67-91, August.
  10. Rose-Ackerman, Susan, 1979. "Market models of local government: Exit, voting, and the land market," Journal of Urban Economics, Elsevier, vol. 6(3), pages 319-337, July.
  11. Roberts, Kevin W. S., 1977. "Voting over income tax schedules," Journal of Public Economics, Elsevier, vol. 8(3), pages 329-340, December.
  12. Kurz, Mordecai, 1994. "Game theory and public economics," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 33, pages 1153-1192 Elsevier.
  13. Grandmont, Jean-Michel, 1978. "Intermediate Preferences and the Majority Rule," Econometrica, Econometric Society, vol. 46(2), pages 317-30, March.
  14. Greenberg, Joseph, 1977. "Existence of an equilibrium with arbitrary tax schemes for financing local public goods," Journal of Economic Theory, Elsevier, vol. 16(2), pages 137-150, December.
  15. Greenberg, J. & Weber, S., 1991. "Stable Coalition Structures with Unidimensional Set of Alternatives," Papers 9133, Tilburg - Center for Economic Research.
  16. Greenberg, Joseph & Weber, Shlomo, 1986. "Strong tiebout equilibrium under restricted preferences domain," Journal of Economic Theory, Elsevier, vol. 38(1), pages 101-117, February.
  17. Bewley, Truman F, 1981. "A Critique of Tiebout's Theory of Local Public Expenditures," Econometrica, Econometric Society, vol. 49(3), pages 713-40, May.
  18. Ellickson, Bryan, 1979. "Competitive equilibrium with local public goods," Journal of Economic Theory, Elsevier, vol. 21(1), pages 46-61, August.
  19. Denzau, Arthur T. & Parks, Robert P., 1983. "Existence of voting-market equilibria," Journal of Economic Theory, Elsevier, vol. 30(2), pages 243-265, August.
  20. William Thomson, 2007. "Fair Allocation Rules," RCER Working Papers 539, University of Rochester - Center for Economic Research (RCER).
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