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Rational Bargaining in Games with Coalitional Externalities

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Publication details

JournalJournal of Economic Theory
DateAccepted/In press - 30 Dec 2014
DateE-pub ahead of print - 16 Jan 2015
DatePublished (current) - May 2015
Volume157
Number of pages19
Pages (from-to)236-254
Early online date16/01/15
Original languageEnglish

Abstract

This paper provides a flexible strategic framework to analyze bargaining and values in environments with coalitional externalities. Within this framework we propose a new value that extends the Shapley value to partition function form games, the so-called Rational Belief Shapley (RBS) value. We investigate the strategic foundation of the RBS value by constructing an implementation mechanism. This mechanism extends existing models of multilateral bargaining by allowing players a higher degree of freedom to form coalitions. The same framework of bidding and renegotiation allows for natural variations of the RBS-mechanism. In this way, alternative “Shapley-like” values are obtained, and a unified platform to analyze and compare these solutions is provided.

    Research areas

  • Externalities, Bargaining, Partial function form game, Rational belief Shapley value, Implementation, Bidding mechanism

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