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Too big to prevail: The paradox of power in coalition formation

Changxia Ke (), Florian Morath (), Anthony Newell () and Lionel Page ()

Working Papers from Faculty of Economics and Statistics, University of Innsbruck

Abstract: In standard coalition games, players try to form a coalition to secure a prize and a coalition agreement specifies how the prize is to be split among its members. However, in practical situations where coalitions are formed, the actual split of the prize often takes place after the coalition formation stage. This creates the possibility for some players to ask for a renegotiation of the initial split. We predict that, in such situations, a player can suffer from being "too strong". Our experimental results confirm that, when the actual split of the prize is delayed, a player's strength can turn into a strategic disadvantage: a greater voting power in forming a winning coalition is undermined by the threat of being overly powerful at the stage when a split is determined. This result is relevant to many real world situations where "too strong" players find it paradoxically hard to partner with weaker players to win the game.

Keywords: Shapley Value; (Non) Binding Agreement; Balance of Power; Communication (search for similar items in EconPapers)
JEL-codes: C71 C92 D72 D74 (search for similar items in EconPapers)
Pages: 68
Date: 2021-09
New Economics Papers: this item is included in nep-cdm and nep-gth
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