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Sequential Formation of Coalitions through Bilateral Agreements in a Cournot Setting

Ines Macho-Stadler (), David Perez-Castrillo () and Nicolás Porteiro

No 06.01, Working Papers from Universidad Pablo de Olavide, Department of Economics

Abstract: We study a sequential protocol of endogenous coalition formation based on a process of bilateral agreements among the players. We apply the game to a Cournot environment with linear demand and constant average costs. We show that the final outcome of any Subgame Perfect Equilibrium of the game is the grand coalition, provided the initial number of firms is high enough and they are sufficiently patient.

Keywords: Coalition formation; bilateral agreements; Cournot. (search for similar items in EconPapers)
JEL-codes: C72 D62 D40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gth and nep-mic
Date: 2006-02
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http://www.upo.es/serv/bib/wps/econ0601.pdf First version, 2006 (application/pdf)

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