The production and cost-sharing of an excludable public good (*)

We study a model of negotiation and coalition formation concerning a public expenditure and its financing. The agents must determine which coalition will jointly produce a public good, how much will be produced, and how the cost is to be shared. Agents that do not belong to the final coalition are excluded from consumption of the public good. Subgame-perfect Nash equilibria in stationary strategies lead to the formation of the grand coalition with an agreed alternative in the core of the economy. Conversely, for each alternative in the core, there exists a subgame-perfect Nash equilibrium in (pure) stationary strategies that leads to the formation of the grand coalition with that alternative.