Stable Coalitions

53 Pages Posted: 7 Feb 2002

See all articles by Carlo Carraro

Carlo Carraro

Ca' Foscari University of Venice; CMCC - Euro Mediterranean Centre for Climate Change (Climate Policy Division); IPCC; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Centre for European Policy Studies, Brussels; Green Growth Knowledge Platform

Carmen Marchiori

Fondazione Eni Enrico Mattei (FEEM); University College London

Multiple version iconThere are 2 versions of this paper

Date Written: January 2002

Abstract

This paper examines recent theoretical developments of the theory of coalition stability. It focuses on the relationship between the incentives to defect from a coalition, the size of the resulting equilibrium coalition structure, and the different assumptions on membership rules, coalition behaviour, players' conjectures, etc. The paper considers several cases. Simultaneous vs. sequential moves, linear vs. circular order of moves, Nash vs. rational conjectures, open vs. exclusive membership, monotonic vs. non monotonic payoff functions, and orthogonal vs. non-orthogonal reaction functions. The profitable and stable coalition will be derived for each possible configuration of the rules of the game, the payoff functions and the membership rules. The results show that the size of the profitable and stable coalition highly depends on the chosen configuration and that the equilibrium outcome ranges from a small coalition with a few signatories to full cooperation. The paper explores under which conditions a large stable coalition is likely to emerge, and identifies the institutional setting that favours the emergence of such coalition.

Keywords: Agreements, coalitions, incentives, negotiations, stability

JEL Classification: H0, H2, H3

Suggested Citation

Carraro, Carlo and Marchiori, Carmen, Stable Coalitions (January 2002). FEEM Working Paper No. 5.2002, Available at SSRN: https://ssrn.com/abstract=299624 or http://dx.doi.org/10.2139/ssrn.299624

Carlo Carraro (Contact Author)

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