Equilibrium Binding Agreements Under Diverse Bahavioral Assumptions
U of Aarhus Economics Working Paper No. 2001-2
19 Pages Posted: 18 Sep 2001
Date Written: February 2001
Abstract
This paper extends the work of Ray and Vohra (1997). It ascertains which partitions of players will emerge and what actions will these players choose under each partition, when they can sign binding agreements and their actions have externalities. The emphasis, however, is placed on situations with multiple outcomes and how agents behave in the presence of such multiplicity. In particular, a deviating coalition considers all the likely outcomes that may prevail upon its deviation, and selects (if possible) a subset of them, avoiding thus an excessively confident behavior, which is the case under Ray and Vohra's notion. Three augmentations of their solution concept are defined, capturing three distinct behavioral assumptions. Their efficiency and relation to each other are discussed.
Keywords: Coalition Structure, Binding Agreement, Stability
JEL Classification: C70, C71
Suggested Citation: Suggested Citation
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