Too Big to Prevail: The Paradox of Power in Coalition Formation

64 Pages Posted: 5 Apr 2021

See all articles by Changxia Ke

Changxia Ke

Queensland University of Technology

Florian Morath

Department of Public Finance, University of Innsbruck; Max Planck Institute for Tax Law and Public Finance

Anthony Newell

Queensland University of Technology

Lionel Page

University of Technology Sydney (UTS)

Date Written: 2021

Abstract

In standard coalition games, players try to form a coalition to secure a prize and a coalition agreement specifies how the prize is to be split among its members. However, in practical situations where coalitions are formed, the actual split of the prize often takes place after the coalition formation stage. This creates the possibility for some players to ask for a renegotiation of the initial split. We predict that, in such situations, a player can suffer from being “too strong”. Our experimental results confirm that, when the actual split of the prize is delayed, a player’s strength can turn into a strategic disadvantage: a greater voting power in forming a winning coalition is undermined by the threat of being overly powerful at the stage when a split is determined. This result is relevant to many real world situations where “too strong” players find it paradoxically hard to partner with weaker players to win the game.

JEL Classification: C710, C920, D720, D740

Suggested Citation

Ke, Changxia and Morath, Florian and Newell, Anthony and Page, Lionel, Too Big to Prevail: The Paradox of Power in Coalition Formation (2021). CESifo Working Paper No. 8980, Available at SSRN: https://ssrn.com/abstract=3819101 or http://dx.doi.org/10.2139/ssrn.3819101

Changxia Ke (Contact Author)

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000
Australia

Florian Morath

Department of Public Finance, University of Innsbruck ( email )

Max Planck Institute for Tax Law and Public Finance ( email )

Marstallplatz 1
Munich, 80539
Germany

Anthony Newell

Queensland University of Technology ( email )

2 George Street
Brisbane, Queensland 4000
Australia

Lionel Page

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

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