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Coalition formation and bargaining power: theory and application to international negotiations on public goods

Alejandro Caparros () and Jean-Christophe Pereau

No 1017, Working Papers from Instituto de Políticas y Bienes Públicos (IPP), CSIC

Abstract: This paper studies the role of bargaining power in coalition formation when two groups of substantially different agents negotiate over a public good with positive or negative spillovers. Both types of agent are allowed to form coalitions before the negotiations start. The forming of coalitions does or does not increase bargaining power, depending on the type of public good and the impact on the agents not participating in the equilibrium agreements. After analyzing the general game we apply it to North-South negotiations. For a public good with positive spillovers, such as climate change abatement, southern countries increase their bargaining power by forming a coalition when a partial agreement induces larger indirect gains for northern countries not participating in the agreement than for non-participating southern countries. We obtain similar results, with the opposite sign, for the formation of a northern coalition.

Keywords: game theory; bargaining; coalition formation; climate change; international environmental agreements. (search for similar items in EconPapers)
JEL-codes: C78 Q54 F59 (search for similar items in EconPapers)
Date: 2010-11
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