ON THE LIMITS TO THE GROWTH OF COALITIONS BY MEANS OF TRANSFERS

This paper investigates the role of expectations in determining the gr owth and stability of coalitions when agents may choose between member ship and 'free riding.' In particular we analyse the nature of coaliti onal stability under the alternative conditions of 'tactical' and 'str ategic' behaviour on the part of agents with regard to other agents. W e show that when agents behave tactically the coalition will always be unstable in the absence of commitment on the part of all of its membe rs. By contrast, when agents behave strategically the pursuit of coali tional stability is individually rational. (C) 1998 Elsevier Science B .V.