Coalition formation processes with belief revision among bounded-rational self-interested agents

This paper studies coalition formation among self-interested agents that cannot make sidepayments. We show that α-core stability reduces to analysing whether some utility profile is maximal for all agents. We also show that strategy profiles that lead to the α-core are a subset of Strong Nash equilibria. This fact carries our α-core-based stability results directly over to two other strategic solution concepts: Nash equilibrium and Coalition-Proof Nash equilibrium. The main focus of the paper is to analyse the dynamic process of coalition formation by explicitly modelling the costs of communication and deliberation. We describe an algorithm for sequential action choice where each agent greedily stepwise maximizes its payoff given its beliefs. Conditions are derived under which this process leads to convergence of the agents' beliefs and to a stable coalition structure. We derive these results for the case where the length of the process is exogenously restricted as well as for the case where agents can choose it. Finally, we show that the outcome of any communication/deliberation process that leads to a stable coalition structure is Pareto-optimal for the original game which does not incorporate communication or deliberation. Conversely, any Pareto-optimal outcome can be supported by a communication/deliberation process that leads to a stable coalition structure.