A Theory of Endogenous Coalition Structures

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.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 449 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.