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Formation of Coalition Structures as a Non-Cooperative Game

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  • Dmitry Levando

    (National Research University Higher School of Economics)

Abstract

The paper defines a family of nested non-cooperative simultaneous finite games to study coalition structure formation with intra and inter-coalition externalities. The novelties of the paper are: a definition of every games embeds a coalition structure formation mechanism. Every game has two outcomes - an allocation of players over coalitions and a payoff profile for every player. The family is parametrized by a maximum coalition size in every coalition structure (a partition) in a game. For every partition a player has a partition-specific set of strategies. The mechanism portions a set of strategies of the game (a Cartesian product) into partition-specific strategy domains, what makes every partition to be itself a non-cooperative game with partition-specific payoffs for every player. Payoffs are assigned separately for every partition and are independent from the mechanism. Every game in the family has an equilibrium in mixed strategies. The equilibrium can generate more than one coalition and encompasses intra and inter group externalities, what makes it different from the Shapley value. Presence of individual payoff allocation makes it different from a strong Nash, coalition-proof equilibrium, and some other equilibrium concepts. The paper demonstrate some applications of the proposed toolkit: for non-cooperative fundamentals of cooperation in a coalition, Bayesian game, stochastic games and construction of a non-cooperative criterium of coalition structure stability.

Suggested Citation

  • Dmitry Levando, 2017. "Formation of Coalition Structures as a Non-Cooperative Game," HSE Working papers WP BRP 157/EC/2017, National Research University Higher School of Economics.
    • Handle: RePEc:hig:wpaper:157/ec/2017
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    References listed on IDEAS

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    1. Mertens, J.-F., 1995. "Two examples of strategic equilibrium," Games and Economic Behavior, Elsevier, vol. 8(2), pages 378-388.
    2. Maskin, Eric, 2011. "Commentary: Nash equilibrium and mechanism design," Games and Economic Behavior, Elsevier, vol. 71(1), pages 9-11, January.
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    More about this item

    Keywords

    noncooperative Games;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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