Coalition Formation in Games with Externalities

Maria Montero

No 2021-05, Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham

Abstract: This paper studies an extensive form game of coalition formation with random proposers in games with externalities. It is shown that an agreement will be reached without delay if any set of coalitions profits from merging. Even under this strong condition, the equilibrium coalition structure is not necessarily efficient. There may be multiple equilibria even in the absence of externalities, and symmetric players are not necessarily treated symmetrically in equilibrium. If the grand coalition forms without delay in equilibrium, expected payoffs must be in the core of the characteristic function game that assigns to each coalition its equilibrium payoff. Compared with the rule of order process of Ray and Vohra (1999), the bargaining procedure with random proposers tends to give a large advantage to the proposer, whereas the bargaining procedure with a rule of order tends to favor the responders. The equilibria of the two procedures cannot be ranked in general in terms of efficiency.

Keywords: coalition formation; externalities; partition function; random proposers; core; multiple equilibria (search for similar items in EconPapers)
Date: 2021-05
New Economics Papers: this item is included in nep-cdm, nep-gth and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.nottingham.ac.uk/cedex/documents/paper ... on-paper-2021-05.pdf (application/pdf)

Related works:
Journal Article: Coalition Formation in Games with Externalities (2023)
Working Paper: Coalition Formation in Games with Externalities (1999)
Working Paper: Coalition Formation in Games with Externalities (1999)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:not:notcdx:2021-05

Access Statistics for this paper

More papers in Discussion Papers from The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham School of Economics University of Nottingham University Park Nottingham NG7 2RD. Contact information at EDIRC.
Bibliographic data for series maintained by Jose V Guinot Saporta ().