Abstract
We study the recursive core introduced in Huang and Sjöström [8]. In general partition function form games, the recursive core coalition structure may be either coarser or finer than the one that maximizes the social surplus. Moreover, the recursive core structure is typically different from the one predicted by the α-core. We fully implement the recursive core for general games, including non-superadditive games where the grand coalition does not form in equilibrium. We do not put any restrictions, such as stationarity, on strategies.
Highlights
Characteristic functions are used to study games without externalities across coalitions
The well-known α-theory is based on incredible threats: the members of any coalition S assume that if S forms, the outsiders will try to hurt the members of S as much as they can, without regard to their own payoffs
In Huang and Sjöström [8], we studied the recursive core for partition function form games that are derived from normal form games
Summary
Characteristic functions are used to study games without externalities across coalitions. In strictly superadditive games with non-empty recursive cores, the grand coalition must form. The game starts with all players simultaneously proposing a way to distribute payoffs and a coalition structure, which in the non-superadditive case may be a nontrivial partitioning of N .
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