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Stochastic stability under logit choice in coalitional bargaining problems

Ryoji Sawa

Games and Economic Behavior, 2019, vol. 113, issue C, 633-650

Abstract: This study examines a dynamic process of n-person coalitional bargaining problems. We investigate the evolution of social conventions by embedding a coalitional bargaining setting in a dynamic process. In each period, a group of players may make some coalitional move, that is, forming a new team or negotiating the division of a surplus. Players revise their coalitions and surplus divisions over time in the presence of stochastic noise, which leads players to make a suboptimal decision. Under a logit specification of choice probabilities, we find that the stability of a core allocation decreases in the wealth of the richest player. Furthermore, stochastically stable allocations are core allocations that minimize the wealth of the richest player.

Keywords: Stochastic stability; Coalitional bargaining; Coalition; Logit-response dynamics; Bargaining (search for similar items in EconPapers)
JEL-codes: C71 C72 C73 C78 (search for similar items in EconPapers)
Date: 2019
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