Coalition formation as a dynamic process.
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The authors consider a set of \(N\) players and a set \(X\) of states. For each coalition \(S\) and a state in \(X,\) a subset of \(X\) of possible states to which the coalition can move is specified. A dynamic process can be induced on \(X\) by a map from the current state to a probability distribution over the set of states to which the coalition \(S\) can move. This process is called a process of coalition formation and is studied in this paper. In the form in which this is studied in this paper, this process gives rise to a Markov process. Under this process the players receive additive utility from the entire path of states and the criterion used is the total expected discounted utility. The class of moves are restricted to those that are Pareto efficient for the given coalition under the value functions induced by the overall process of coalition formation. The notion of an equilibrium process of coalition formation is introduced and its existence is studied. Many related issues are also studied.
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