An Experimental Study of Self-Enforcing Coalitions

Abstract

We study a model in which agents endowed with power compete for a divisible resource by forming coalitions with other agents. The coalition with the greatest power wins the resource and divides it among its members via proportional sharing. We conduct an economic experiment using this model to investigate possible behavioral factors that may explain deviations from theoretical predictions. The main findings show that agents display rational behavior when forming coalitions, especially when they know that a large proportion of their opponents play myopic strategies from the outset. Over time, however, agents learn to behave more strategically and even more rationally, thus enabling agents to display more of the behavior predicted by the coalition formation model with farsighted agents.