Sequential formation of coalitions through bilateral agreements in a Cournot setting

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Abstract

We study a sequential protocol of endogenous coalition formation based on a process of bilateral agreements among the players. We apply the game to a Cournot environment with linear demand and constant average costs. We show that the final outcome of any subgame perfect equilibrium of the game is the grand coalition, provided the initial number of firms is high enough and they are sufficiently patient.
Original languageEnglish
Pages (from-to)207-228
JournalInternational Journal of Game Theory
Volume34
DOIs
Publication statusPublished - 1 Jul 2006

Keywords

  • Bilateral agreements
  • Coalition formation
  • Cournot

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