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.
|Journal||International Journal of Game Theory|
|Publication status||Published - 1 Jul 2006|
- Bilateral agreements
- Coalition formation