A Theory of Endogenous Coalition Structures

Debraj Ray, Rajiv Vohra

    Research output: Contribution to journalArticle

    Abstract

    Consider an environment with widespread externalities, and suppose that binding agreements can be written. We study coalition formation in such a setting. Our analysis proceeds by defining on a partition function an extensive-form bargaining game. We establish the existence of a stationary subgame perfect equilibrium for such a game. Our main results are concerned with the characterization of equilibriumcoalition structures. We develop an algorithm that generates (under certain conditions) an equilibrium coalition structure. Our characterization results are especially sharp forsymmetricpartition functions. In particular, we provide a uniqueness theorem and apply our results to a Cournot oligopoly.Journal of Economic LiteratureClassification Numbers: C71, C72, C78, D62.

    Original languageEnglish (US)
    Pages (from-to)286-336
    Number of pages51
    JournalGames and Economic Behavior
    Volume26
    Issue number2
    DOIs
    StatePublished - Jan 1999

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

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