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Potential Maximization and Coalition Government Formation

Rodney Garratt (), Cheng-Zhong Qin, James Parco () and Amnon Rapoport
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Cheng-Zhong Qin: Department Economics, University of California

No 2004.82, Working Papers from Fondazione Eni Enrico Mattei

Abstract: A model of coalition government formation is presented in which inefficient, non-minimal winning coalitions may form in Nash equilibrium. Predictions for five games are presented and tested experimentally. The experimental data support potential maximization as a refinement of Nash equilibrium. In particular, the data support the prediction that non-minimal winning coalitions occur when the distance between policy positions of the parties is small relative to the value of forming the government. These conditions hold in games 1, 3, 4 and 5, where subjects played their unique potential-maximizing strategies 91, 52, 82 and 84 percent of the time, respectively. In the remaining game (Game 2) experimental data support the prediction of a minimal winning coalition. Players A and B played their unique potential-maximizing strategies 84 and 86 percent of the time, respectively, and the predicted minimal-winning government formed 92 percent of the time (all strategy choices for player C conform with potential maximization in Game 2). In Games 1, 2, 4 and 5 over 98 percent of the observed Nash equilibrium outcomes were those predicted by potential maximization. Other solution concepts including iterated elimination of dominated strategies and strong/coalition proof Nash equilibrium are also tested.

Keywords: Coalition formation; Potential maximization; Nash equilibrium refinements; Experimental study; Minimal winning (search for similar items in EconPapers)
JEL-codes: C72 C78 D72 (search for similar items in EconPapers)
Date: 2004-05
New Economics Papers: this item is included in nep-exp and nep-pol
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Related works:
Journal Article: POTENTIAL MAXIMIZATION AND COALITION GOVERNMENT FORMATION (2005) Downloads
Working Paper: Potential Maximization and Coalition Government Formation (2000) Downloads
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