Olson vs. Coase: Coalitional Worth in Conflict

Abstract

We analyze a model of conflict with endogenous choice of effort, where subsets of the contenders may force the resolution to be sequential: First the alliance fights it out with the rest and ­ in case they win ­ later they fight it out among themselves. For three-player games, we find that it will not be in the interest of any two of them to form an alliance. We obtain this result under two different scenarios: equidistant preferences with varying relative strengths, and vicinity of preferences with equal distribution of power. We conclude that the commonly made assumption of super-additive coalitional worth is suspect.

Keywords: Coalition formation, conflict, alliance