Truthfulness in Coalitions: A Sequential Equilibrium Analysis

26 Pages Posted: 12 Nov 2007

See all articles by Murray Brown

Murray Brown

SUNY at Buffalo, College of Arts & Sciences, Department of Economics

Shin-Hwan Chiang

York University - Department of Economics

Date Written: November 2007

Abstract

The paper integrates the formation of coalitions by a standard sequential offer procedure and the truthfulness - cheating strategies of their members, which support sequential equilibria. We derive the probabilities of truthfulness for players in a two - and three - member coalition in terms of the payoffs. It turns out that in a sequential equilibrium, these probabilities are determined by the tension between two basic incentives: the incentive to cheat and the incentive to defend against cheating. Both incentives are expressed in terms of payoffs. Among the results, we find that if the latter dominates the incentive to cheat, honesty is a pure strategy that supports a sequential equilibrium. Also, feasible payoff patterns are identified in which honesty and cheating do not matter; that is, whether the players are honest or not, the same coalitions emerge in a subgame perfect equilibrium. Other well defined payoff patterns are uncovered in which players' truthfulness is associated with different coalition sizes and structures so that honesty and cheating do matter in this sense.

Keywords: Noncooperative Games, Organizational Behavior

JEL Classification: C72, D23

Suggested Citation

Brown, Murray and Chiang, Shin-Hwan, Truthfulness in Coalitions: A Sequential Equilibrium Analysis (November 2007). Available at SSRN: https://ssrn.com/abstract=1029183 or http://dx.doi.org/10.2139/ssrn.1029183

Murray Brown (Contact Author)

SUNY at Buffalo, College of Arts & Sciences, Department of Economics ( email )

Fronczak Hall
Buffalo, NY 14260
United States
716-838-1941 (Phone)
716-645-2127 (Fax)

Shin-Hwan Chiang

York University - Department of Economics ( email )

4700 Keele St.
Toronto, Ontario M3J 1P3
Canada
416-736-5083 (Phone)

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
48
Abstract Views
496
PlumX Metrics