A THEORY OF GRADUAL COALITION-FORMATION

We study noncooperative multilateral bargaining games, based on underl ying TU games, in which coalitions can renegotiate their agreements. W e distinguish between models in which players continue to bargain afte r implementing agreements (''reversible actions'') and models in which players who implement agreements must leave the game (''ineversible a ctions''). We show that renegotiation always results in formation of t he grand coalition if actions are reversible, but that the process may otherwise end with smaller coalitions. On the other hand, we show tha t the grand coalition cannot form in one step if the core of the game is empty, irrespective of the reversibility of actions.