Pareto Optimality in Coalition Formation

A minimal requirement on allocative efficiency in the social sciences is Pareto optimality. In this paper, we identify a far-reaching structural connection between Pareto optimal and perfect partitions that has various algorithmic consequences for coalition formation. In particular, we show that computing and verifying Pareto optimal partitions in general hedonic games and B-hedonic games is intractable while both problems are tractable for roommate games and W-hedonic games. The latter two positive results are obtained by reductions to maximum weight matching and clique packing, respectively.

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