Internal hierarchy and stable coalition structures
Title: Internal hierarchy and stable coalition structures
Citation: Games and economic behavior, 2016, Vol. 96, pp. 90-96
In deciding whether to join a coalition or not, an agent must consider both i) the expected power of the coalition and ii) her position in the vertical structure within the coalition. We establish the existence of a positive relationship between the degree of inequality in remuneration within coalitions and the number of coalitions to be formed endogenously in stable systems. We show that such coalitions can be mixed and balanced, rather than segregated, in terms of members' ability levels. In any stable system each coalition is of an efficient size and every agent is paid her marginal contribution.
Received 11 October 2014, Available online 26 January 2016
Initial version: http://hdl.handle.net/1814/17579
Version: Article is version of EUI WP ECO; 2011/20
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