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Lucas Counter Example Revisited

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  • Effrosyni Diamantoudi
  • Licun Xue

Abstract

We revisit Lucas’(1968) counter example for the existence of von Neumann and Morgenstern (1944) stable set (solution) for coalitional games. We show that when we endow the agents with foresight, particularly, when we replace von Neumann and Morgenstern’s (1944) dominance relation with the indirect dominance relations introduced by Harsanyi (1974), Lucas’s example admits a stable set.

Suggested Citation

  • Effrosyni Diamantoudi & Licun Xue, 2006. "Lucas Counter Example Revisited," Departmental Working Papers 2005-09, McGill University, Department of Economics.
    • Handle: RePEc:mcl:mclwop:2005-09
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    File URL: http://www.mcgill.ca/files/economics/lucuscounterexample.pdf
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    References listed on IDEAS

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    1. John C. Harsanyi, 1974. "An Equilibrium-Point Interpretation of Stable Sets and a Proposed Alternative Definition," Management Science, INFORMS, vol. 20(11), pages 1472-1495, July.
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    Cited by:

    1. Béal, Sylvain & Durieu, Jacques & Solal, Philippe, 2008. "Farsighted coalitional stability in TU-games," Mathematical Social Sciences, Elsevier, vol. 56(3), pages 303-313, November.
    2. Hannu Vartiainen, 2007. "Dynamic Farsighted Stability," Discussion Papers 22, Aboa Centre for Economics.
    3. Anindya Bhattacharya & Victoria Brosi, 2011. "An existence result for farsighted stable sets of games in characteristic function form," International Journal of Game Theory, Springer;Game Theory Society, vol. 40(2), pages 393-401, May.

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    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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