A Theory of Gradual Coalition Formation.

The authors study noncooperative multilateral bargaining games, based on underlying TU games, in which coalitions can renegotiate their agreements. They distinguish between models in which players continue to bargain after implementing agreements (reversible actions) and models in which players who implement agreements must leave the game (irreversible actions). The authors show that renegotiation always results in formation of the grand coalition if actions are reversible but that the process may otherwise end with smaller coalitions. On the other hand, they show that the grand coalition cannot form in one step if the core of the game is empty, irrespective of the reversibility of actions. Copyright 1998 by The Review of Economic Studies Limited.