Efficiency and stability in a strategic model of hedonic coalitions
International Journal of Economic Theory
Published online on May 17, 2013
Abstract
This paper analyzes the partitioning of a society into coalitions in a setting where heterogeneous players produce private and club goods. Their preferences are hedonic and are represented by a utility function with two arguments, namely their consumptions of these two goods. The focus is on the compatibility of overall societal welfare with individual incentives to move the coalition or accept new coalition mates under alternative utility specifications and agents’ productivities.