Coalition Formation with Binding Agreements in Contests

27 Pages Posted: 16 Feb 2016 Last revised: 9 Dec 2020

See all articles by Saish Nevrekar

Saish Nevrekar

Universidad Carlos III de Madrid

Date Written: October 21, 2020

Abstract

This paper studies the problem of endogenous coalition formation in contests. The model presented adopts a novel approach by assuming certain properties for the winning probability pertaining to a wide class of Tullock contest success functions. Next, we analyse a one-shot sequential coalition formation game proposed by Bloch (1996) for an arbitrary number of symmetric players and exogenous effort under the restrictions imposed by these properties. We show that there exists a unique, but asymmetric equilibrium. That is, the equilibrium consists of two or more coalitions where no two coalitions are of equal size. This result is interesting because our model is symmetrical, but yields an asymmetric power distribution. Lastly, we extend these results to include endogenous efforts.

Keywords: Contest Theory, Coalition Formation, Non-cooperative game theory

JEL Classification: C72, C78, D01, D70

Suggested Citation

Nevrekar, Saish, Coalition Formation with Binding Agreements in Contests (October 21, 2020). Available at SSRN: https://ssrn.com/abstract=2732223 or http://dx.doi.org/10.2139/ssrn.2732223

Saish Nevrekar (Contact Author)

Universidad Carlos III de Madrid ( email )

Calle Madrid 126
Getafe, 28903
Spain

HOME PAGE: http://saishnevrekar.com

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