The Lectures

The first three lectures will study some new developments in the theory of binding agreements and coalition formation.

Lecture 1. Binding agreements. Overview of cooperative game theory. Characteristic functions. Examples. The core. Basic core existence theorem. Some applications. Two inadequacies: the core (or related variants) as a solution concept, and the characteristic function as a primitive specification.

Basic reference: My lecture notes

Supplementary references:

M. Chwe (1994), "Farsighted Coalitional Stability," Journal of Economic Theory 63, 299--325.

H. Moulin (1986), Game Theory for the Social Sciences, second and revised edition, New York University Press.

R. Myerson (1991), Game Theory: Analysis of Conflict, Harvard University Press.

D. Ray (1989), "Credible Coalitions and the Core," International Journal of Game Theory 18, 185--187.

Lecture 2. Extending the idea of the characteristic function. Partition functions. Review of Rubinstein bargaining. Bargaining on partition functions. Developing the solution concept for symmetric partition functions. An algorithm.

Basic reference:

D. Ray and R. Vohra (1999), "A Theory of Endogenous Coalition Structure," Games and Economic Behavior 26, 286--336.

Supplementary references:

F. Bloch (1996), "Sequential Formation of Coalitions With Fixed Payoff Division," Games and Economic Behavior 14, 90--123.

F. Bloch (1997), "Noncooperative Models of Coalition Formation in Games with Spillovers," in New Directions in the Economic Theory of the Environment (C. Carraro and D. Siniscalco eds.), Cambridge University Press.

D. Ray and R. Vohra (1997), "Equilibrium Binding Agreements," Journal of Economic Theory 73, 30--78.

Lecture 3. Applications: Cournot oligopoly and public goods. Comments on renegotiation in coalition formation.

Basic references:

F. Bloch (1996), "Sequential Formation of Coalitions With Fixed Payoff Division," Games and Economic Behavior 14, 90--123.

D. Ray and R. Vohra (2001), "Coalitional Power and Public Goods," Journal of Political Economy 109, 1355--1384.

A. Gomes and P. Jehiel (2004), "Dynamic Processes of Social and Economic Interactions: On the Persistence of Inefficiencies," forthcoming, Journal of Political Economy.

Supplementary references:

H. Konishi and D. Ray (2003), "Coalition Formation as a Dynamic Process," Journal of Economic Theory 110, 1--41.

A. Okada (2000), "The Efficiency Principle In Non-Cooperative Coalitional Bargaining." Japanese Economic Review 51, 34--50.

D. Seidmann and E. Winter (1998), "Gradual Coalition Formation," Review of Economic Studies 65, 793--815 [JSTOR link].

The last two lectures will concentrate on aspects of group interaction in the non-binding case. Both lectures will study group interaction in repeated situations.

Lecture 4. The ex-post enforcement constraint: the case of informal insurance.

G. Genicot and D. Ray (2003), "Group Formation in Risk-Sharing Arrangements," Review of Economic Studies 70, 87--113.

Lecture 5. Repeated group interaction with limited information flow.

P. Ghosh and D. Ray (1996), "Cooperation in Community Interaction without Information Flows," Review of Economic Studies 63, 491--519.