Endogenous Formation of Coalitions

We develop a model of coalition formation based on personal proximities among the players of an n-person game. Several examples are worked out in detail, showing that certain coalitions are much more stable than others, and/or much more likely to form than others. We also consider the dynamics of such coalition-formation. By a numerical example, we show that small changes in the initial conditions can lead to very different results in the coalitions formed in a given game.