Coalition formation and history dependence

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http://hdl.handle.net/10138/312185

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Dutta , B & Vartiainen , H 2020 , ' Coalition formation and history dependence ' , Theoretical Economics , vol. 15 , no. 1 , pp. 159-197 . https://doi.org/10.3982/TE2947

Title: Coalition formation and history dependence
Author: Dutta, Bhaskar; Vartiainen, Hannu
Contributor: University of Helsinki, Economics
Date: 2020-01
Language: eng
Number of pages: 39
Belongs to series: Theoretical Economics
ISSN: 1933-6837
URI: http://hdl.handle.net/10138/312185
Abstract: Farsighted formulations of coalitional formation, for instance, by Harsanyi and Ray and Vohra, have typically been based on the von Neumann-Morgenstern stable set. These farsighted stable sets use a notion of indirect dominance in which an outcome can be dominated by a chain of coalitional "moves" in which each coalition that is involved in the sequence eventually stands to gain. Dutta and Vohra point out that these solution concepts do not require coalitions to make optimal moves. Hence, these solution concepts can yield unreasonable predictions. Dutta and Vohra restricted coalitions to hold common, history-independent expectations that incorporate optimality regarding the continuation path. This paper extends the Dutta-Vohra analysis by allowing for history-dependent expectations. The paper provides characterization results for two solution concepts that correspond to two versions of optimality. It demonstrates the power of history dependence by establishing nonemptyness results for all finite games as well as transferable utility partition function games. The paper also provides partial comparisons of the solution concepts to other solutions.
Subject: Coalition formation
farsightedness
vNM stable set
history dependence
maximality
STABLE SETS
STABILITY
AGREEMENTS
GAMES
511 Economics
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