Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/248296 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
CeDEx Discussion Paper Series No. 2021-05
Publisher: 
The University of Nottingham, Centre for Decision Research and Experimental Economics (CeDEx), 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.
Subjects: 
coalition formation
externalities
partition function
ran-dom proposers
core
multiple equilibria
JEL: 
C71
C72
C78
Document Type: 
Working Paper

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