On Coalition-Proof Nash Equilibria in Common Agency Games

Abstract In this paper we consider two notions of a coalitional deviation: strict deviation , where each of member of a deviating group is better off, and weak deviation , where at least one member of a deviating group is better off while all other members are at least as well off. We then examine, for the class of common agency games introduced in Bernheim and Whinston ( Quart. J. Econ. 101 (1986), 1–31), the structure and properties of two notions of a coalition-proof Nash equilibrium, generated by strict and weak deviation. We also study a relationship between coalition-proof equilibria, strong equilibria, and Pareto undominated Nash equilibria. Journal of Economic Literature Classification Numbers: C72, D79.