Endogenous coalition formation in contests |
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Authors: | Santiago Sánchez-Pagés |
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Institution: | (1) Department of Economics, University of Edinburgh, 50 George Square, EH8 9JY Edinburgh, UK |
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Abstract: | This paper analyzes coalition formation in a model of contests with linear costs. Agents first form groups and then compete
by investing resources. Coalitions fight for a prize that is assumed to be subject to rivalry, so its value is non-increasing
in the size of the group that obtains it. This formulation encompasses as particular cases some models proposed in the rent-seeking
literature. We show that the formation of groups generates positive spillovers and analyze two classes of games of coalition
formation. A contest among individual agents is the only stable outcome when individual defections leave the rest of the group
intact. More concentrated coalition structures, including the grand coalition, are stable when groups collapse after a defection,
provided that rivalry is not too strong. Results in a sequential game of coalition formation suggest that there exists a non-monotonic
relationship between the level of underlying rivalry and the level of social conflict.
“If men were supplied with every thing in the same abundance, justice and injustice would be equally unknown among mankind.”
David Hume (1740), A Treatise of Human Nature
I thank Luis Corchón, Joan Esteban, Michelle Garfinkel and József Sákovics for their comments and suggestions on the paper. |
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Keywords: | Contests Coalition formation Conflict Rivalry |
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