A Theory of Endogenous Coalition Structures
Date
01.01.1998
01.01.1998
Authors
Rajiv Vohra, Debraj Ray
JEL Code
C71,C72,C78,D62
C71,C72,C78,D62
Keywords:
Externalities,Bargaining,Partition function,Coalition structures
Externalities,Bargaining,Partition function,Coalition structures
Publisher
Climate Change and Sustainable Development
Climate Change and Sustainable Development
Editor
Carlo Carraro
Carlo Carraro
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 characterisation of equilibrium coalition structures. We develop an algorithm that generates (under certain conditions) an equilibrium coalition structure. Our characterisation results are especially sharp for symmetric partition functions. In particular, we provide a uniqueness theorem and apply our results to a Cournot oligopoly.