Order Matters: On Maskin's Coalition Formation Bargaining Model

Abstract:     
We first show through a counter-example that the existence result of Maskin: Bargaining, coalitions and externalities, Presidential address of the Econometric Society, 2003] does not extend beyond three players.Intuitively, the bargaining may not be able to continue because there may be no optimal offer at all. Then we consider the effect of bargaining orders for the three player coalitional games with no externality (i.e. the characteristic function form game. Super-additivity is not assumed). It is proved that order does matter: the first position is always the best of all. However, the second position may be worse than the third one.

Number of Pages in PDF File: 8

Keywords: Maskin bargaining, coalition formation, limited efficiency, bargaining order

JEL Classification: C78, C71

working papers series