Abstract
We study coalition formation problems with externalities. We prove that, if expectations are not prudent a stable coalitions structure may fail to exist. Under prudent expectations a stable and efficient coalition structure exists if the set of admissible coalitions is single-lapping. However, under this assumption the stable set is not a singleton, and no stable strategy-proof revelation mechanism exists, differently from the case without externalities. Finally, the stable correspondence is Nash implementable.
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