FEEM working papers "Note di lavoro" series
2003 .052

Farsightedness and Cautiousness in Coalition Formation


Authors: Vincent Vannetelbosch, Ana Mauleon
Series: Climate Change and Sustainable Development
Editor: Carlo Carraro
Type: Journal
Keywords: Coalition formation,Farsightedness,Cautiousness,Positive spillovers,Largest consistent set
JEL n.: C70,C71,C72,C78
JEL: Theory and Decision
Pages: 56(3), 291-324
Date: 2004

Abstract

We adopt the largest consistent set defined by Chwe [J. of Econ. Theory 63 (1994), 299-235] to predict which coalition structures are possibly stable when players are farsighted. We also introduce a refinement, the largest cautious consistent set, based on the assumption that players are cautious. For games with positive spillovers, many coalition structures may belong to the largest consistent set. The grand coalition, which is the efficient coalition structure, always belongs to the largest consistent set and is the unique one to belong to the largest cautious consistent set.

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