Overlapping Coalitions, Bargaining and Networks

Abstract

This paper extends the theory of endogenous coalition formation, with complete information and transferable utility, to the overlapping case. We propose a cover function bargaining game which allows the formation of overlapping coalitions at equilibrium. We show the existence of subgame perfect equilibrium and provide an algorithm to compute this equilibrium in the symmetric case. As an application, we establish an interesting link with the formation of networks.

Keywords: Overlapping Coalitions, Cover Function, Bargaining, Symmetric Game, Network

JEL Classification: C71, C72, C78, D62, D85