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Sequential Formation of Coalitions through Bilateral Agreements in a Cournot Setting

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Author Info
Inés Macho-Stadler () (Department of Economics, Universidad Autónoma de Barcelona)
David Pérez-Castrillo () (Department of Economics, Universidad Autónoma de Barcelona)
Nicolás Porteiro () (Department of Economics, Universidad Pablo de Olavide)

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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.

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File URL: http://www.upo.es/serv/bib/wps/econ0601.pdf
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File Function: First version, 2006
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Publisher Info
Paper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 06.01.

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Length: 30 pages
Date of creation: Feb 2006
Date of revision:
Handle: RePEc:pab:wpaper:06.01

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Related research
Keywords: Coalition formation; bilateral agreements; Cournot.;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D62 - Microeconomics - - Welfare Economics - - - Externalities
D40 - Microeconomics - - Market Structure and Pricing - - - General

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  1. Houston, Joel F. & James, Christopher M. & Ryngaert, Michael D., 2001. "Where do merger gains come from? Bank mergers from the perspective of insiders and outsiders," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 285-331, May. [Downloadable!] (restricted)
  2. Ray, Debraj & Vohra, Rajiv, 1997. "Equilibrium Binding Agreements," Journal of Economic Theory, Elsevier, vol. 73(1), pages 30-78, March. [Downloadable!] (restricted)
    Other versions:
  3. Gautam Gowrisankaran & Thomas J. Holmes, 2004. "Mergers and the Evolution of Industry Concentration: Results from the Dominant-Firm Model," RAND Journal of Economics, The RAND Corporation, vol. 35(3), pages 561-582, Autumn.
  4. repec:fth:tilbur:99121 is not listed on IDEAS
  5. Gul, Faruk, 1989. "Bargaining Foundations of Shapley Value," Econometrica, Econometric Society, vol. 57(1), pages 81-95, January. [Downloadable!] (restricted)
  6. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May. [Downloadable!] (restricted)
  7. Ray, Debraj & Vohra, Rajiv, 1999. "A Theory of Endogenous Coalition Structures," Games and Economic Behavior, Elsevier, vol. 26(2), pages 286-336, January. [Downloadable!] (restricted)
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  8. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, July. [Downloadable!] (restricted)
  9. DIAMANTOUDI, Effrosyni & XUE, Licun, 2002. "Coalitions, agreements and efficiency," CORE Discussion Papers 2002047, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  10. Gautam Gowrisankaran & Thomas J. Holmes, 2000. "Do mergers lead to monopoly in the long run? Results from the dominant firm model," Staff Report 264, Federal Reserve Bank of Minneapolis. [Downloadable!]
    Other versions:
  11. Montero, M., 1999. "Coalition formation in games with externalities," Discussion Paper 121, Tilburg University, Center for Economic Research. [Downloadable!]
  12. Martin Pesendorfer, 2005. "Mergers Under Entry," RAND Journal of Economics, The RAND Corporation, vol. 36(3), pages 661-679, Autumn.
  13. Kamien, Morton I & Zang, Israel, 1990. "The Limits of Monopolization through Acquisition," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 465-99, May. [Downloadable!] (restricted)
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  14. Seidmann, Daniel J & Winter, Eyal, 1998. "A Theory of Gradual Coalition Formation," Review of Economic Studies, Blackwell Publishing, vol. 65(4), pages 793-815, October. [Downloadable!] (restricted)
  15. Bloch, Francis, 1996. "Sequential Formation of Coalitions in Games with Externalities and Fixed Payoff Division," Games and Economic Behavior, Elsevier, vol. 14(1), pages 90-123, May. [Downloadable!] (restricted)
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  1. Fumagalli, Eileen & Nilssen, Tore, 2008. "Waiting to Merge," Memorandum 13/2008, Oslo University, Department of Economics. [Downloadable!]
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