FEEM working papers "Note di lavoro" series
2004 .043

Coalition Formation in Games without Synergies


Authors: Marco Marini, Sergio Currarini
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Coalition formation,Synergies,Strong Nash equilibrium
JEL n.: C7
JEL: International Game Theory Review,
Pages: Vol. 8, Issue 1, pp. 1-16
Date: 2006

Abstract

This paper establishes sufficient conditions for the existence of a stable coalition structure in the "coalition unanimity" game of coalition formation, first defined by Hart and Kurz (1983) and more recently studied by Yi (1997, 2000). Our conditions are defined on the strategic form game used to derive the payoffs the game of coalition formation. We show that if no synergies are generated by the formation of coalitions, a stable coalition structure always exists provided that players are symmetric and either the game exhibits strategic complementarity or, if strategies are substitutes, the best reply functions are contractions. We illustrate the role of synergies in a Cournot oligopoly example with cost reducing R&D.

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