Forming societies and the Shapley NTU value

Abstract

We design a simple protocol of coalition formation. A society grows up by sequentially incorporating new members. The negotiations are always bilateral. We study this protocol in the context of non-transferable utility (NTU) games in characteristic function form. When the corresponding NTU game (N,V) satisfies that V(N) is flat, the only payoff which arises in equilibrium is the Shapley NTU value.Shapley NTU value, sequential formation of coalitions, subgame perfect equilibrium