Axiomatic Approach to Farsighted Coalition Formation

Mert Kimya

No 2024-03, Working Papers from University of Sydney, School of Economics

Abstract: We provide the first axiomatic treatment of two of the most fundamental far-sighted solution concepts. We then extend our analysis to include an axiomatization of the stable set to the extent that it is farsighted. In fi nite abstract games a solution is the largest consistent set if and only if it is maximally supportable and nonempty. In any abstract game a solution is the farsighted stable set if and only if it is minimally supportable, consistent, conversely consistent and nonempty in finite horizon games. We call the stable set that does not suffer from Harsanyi (1974)'s critique of myopia the Harsanyi stable set. In any abstract game a solution is the Harsanyi stable set if and only if it is simply supportable, consistent, weakly conversely consistent and it satisfi es restricted nonemptiness. The axioms of consistency and converse consistency are the adaptations of the frequently used principles of consistency and converse consistency to a farsighted framework. The axioms of maximal supportability, minimal supportability and simple supportability relate to the commonly held expectations that support these solutions as their stationary states.

Date: 2024-03
New Economics Papers: this item is included in nep-gth and nep-mic
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