Bargaining for Coalition Structure Formation

Abstract. Many multiagent settings require a collection of agents to partition themselves into coalitions. In such cases, the agents may have conflicting preferences over the possible coalition structures that may form. We investigate a noncooperative bargaining game to allow the agents to resolve such conflicts and partition themselves into non-overlapping coalitions. The game has a finite horizon and is played over discrete time periods. The bargaining agenda is de-fined exogenously. An important element of the game is a parame-ter 0 ≤ δ ≤ 1 that represents the probability that bargaining ends in a given round. Thus, δ is a measure of the degree of democracy (ranging from democracy for δ = 0, through increasing levels of authoritarianism as δ approaches 1, to dictatorship for δ = 1). For this game, we focus on the question of how a player’s position on the agenda affects his power. We also analyse the relation between the distribution of the power of individual players, the level of democ-racy, and the welfare efficiency of the game. Surprisingly, we find that purely democratic games are welfare inefficient due to an un-even distribution of power among the individual players. Interest-ingly, introducing a degree of authoritarianism into the game makes the distribution of power more equitable and maximizes welfare.