Coalition Formation Among Farsighted Agents

A set of coalition structures P is farsightedly stable if all possible deviations from any coalition structure p belonging to P to a coalition structure outside P are deterred by the threat of ending worse off or equally well off, if there exists a farsighted improving path from any coalition structure outside the set leading to some coalition structure in the set, and if there is no proper subset of P satisfying the first two conditions. A non-empty farsightedly stable set always exists. The authors provide a characterization of unique farsightedly stable sets of coalition structures. Finally, they illustrate the results by means of coalition formation games with positive spillovers.