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Internal Hierarchy and Stable Coalition Structures

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  • Massimo Morelli
  • In-Uck Park

Abstract

In deciding whether to join a coalition or not, an agent must consider both i) the expected power of the coalition and ii) her position in the vertical structure within the coalition. We establish the existence of a positive relationship between the degree of inequality in remuneration across ranks within coalitions and the number of coalitions to be formed endogenously in stable systems. An inherent feature of such coalitions is that they are mixed and balanced, rather than segregated, in terms of members abilities. When the surplus of a coalition is assumed to be linear in its relative power conditional on its size, we also establish the existence of stable systems and characterise them fully: a system is stable if and only if all coalitions are of an esocient size and every agent is paid her marginal contribution. (JEL Codes: C71, D71) Keywords: Stable systems, Abilities, Hierarchy, Cyclic partition.

Suggested Citation

  • Massimo Morelli & In-Uck Park, 2014. "Internal Hierarchy and Stable Coalition Structures," Working Papers 528, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:528
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    Cited by:

    1. Tobias Hiller, 2022. "Abilities and the structure of the firm," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 69(3), pages 339-349, September.
    2. Barberà, Salvador & Beviá, Carmen & Ponsatí, Clara, 2015. "Meritocracy, egalitarianism and the stability of majoritarian organizations," Games and Economic Behavior, Elsevier, vol. 91(C), pages 237-257.
    3. Hideaki Goto, 2021. "Marginal Productivity and Coalition Formation with Distributive Norms," Working Papers EMS_2021_05, Research Institute, International University of Japan.
    4. Demange, Gabrielle, 2024. "Stable outcomes in simple cooperative games," Journal of Mathematical Economics, Elsevier, vol. 111(C).
    5. Gabrielle Demange, 2017. "The stability of group formation," Revue d'économie politique, Dalloz, vol. 127(4), pages 495-516.
    6. Herings, P. Jean-Jacques & Saulle, Riccardo & Seel, Christian, 2018. "The Last will be First, and the First Last: Segregation in Societies with Positional Externalities," Research Memorandum 027, Maastricht University, Graduate School of Business and Economics (GSBE).
    7. Morelli, Massimo & Park, In-Uck, 2016. "Internal hierarchy and stable coalition structures," Games and Economic Behavior, Elsevier, vol. 96(C), pages 90-96.
    8. Herings, P. Jean-Jacques & Saulle, Riccardo & Seel, Christian, 2020. "The Last will be First, and the First Last: Segregation in Societies with Relative Payoff Concerns (RM/18/027-revised-)," Research Memorandum 011, Maastricht University, Graduate School of Business and Economics (GSBE).
    9. Tobias Hiller, 2023. "Training, Abilities and the Structure of Teams," Games, MDPI, vol. 14(3), pages 1-8, May.

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    More about this item

    Keywords

    stable systems; abilities; hierarchy; cyclic partition.;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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