Endogenous coalition formation and bargaining

Coalition formation is a frequent phenomenon in everyday life. Firms merge, states sign treaties and authors write papers together. In most of these situations, the payoff of a coalition depends on whether and which other coalitions form: the formation of coalition imposes externalities on outsiders. The first part of this thesis analyzes coalition formation in situations with externalities using noncooperative game theory. The predicted organization of players in coalitions will generally not be efficient. Besides efficiency, the issue of distribution is studied: individuals who do not bring additional value to a situation but can affect the distribution of this value can exploit their position. The thesis also points out the pros and cons of several noncooperative models. The second part of the thesis discusses a family of cooperative solution concepts called bargaining sets, and in particular the stable demand set. The stable demand set is found to make very reasonable predictions for two classes of empirically relevant situations: constant-sum majority games and quota games.