Sequential Formation of Coalitions through Bilateral Agreements

Ines Macho-Stadler (), David Perez-Castrillo () and Nicolás Porteiro ()

UFAE and IAE Working Papers from Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC)

Abstract: We study a sequential protocol of endogenous coalition formation based on a process of bilateral agreements among the players. We apply the game to a Cournot environment with linear demand and constant average costs. We show that the final outcome of any Subgame Perfect Equilibrium of the game is the grand coalition, provided the initial number of firms is high enough and they are sufficiently patient.

Keywords: Coalition Formation; Bilateral Agreements (search for similar items in EconPapers)
JEL-codes: C71 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth
Date: 2002-06-14
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Persistent link: http://EconPapers.repec.org/RePEc:aub:autbar:515.02

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