, Volume 32, Issue 3, pp 389-406
Date: 26 Aug 2008

Membership rules and stability of coalition structures in positive externality games

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Abstract

This paper compares the stability of coalition structures under six institutional settings of treaty formation in positive externality games. We argue that many economic problems belong to the class of positive externality games (i.e. outsiders benefit from the formation of coalitions) and hence our results can be applied to many situations. It is shown that it is easier to sustain agreements under exclusive than under open membership and the higher the “degree of consensus” necessary to form a coalition.