Abstract
This paper analyzes secession and group formation in the general model of contests due to Esteban and Ray (1999). This model encompasses as special cases rent seeking contests and policy conflicts, where agents lobby over the choice of a policy in a one-dimensional policy space. We show that in both models the grand coalition is the efficient coalition structure and agents are always better off in the grand coalition than in a contest among singletons. Individual agents (in the rent seeking contest) and extremists (in the policy conflict) only have an incentive to secede when they anticipate that their secession will not be followed by additional secessions. Incentives to secede are lower when agents cooperate inside groups. The grand coalition emerges as the unique subgame perfect equilibrium outcome of a sequential game of coalition formation in rent seeking contests.
| Original language | English |
|---|---|
| Pages (from-to) | 3-29 |
| Number of pages | 27 |
| Journal | Economics of Governance |
| Volume | 7 |
| Issue number | 1 |
| Publication status | Published - Jan 2006 |
Keywords / Materials (for Non-textual outputs)
- secession
- group formation
- rent seek contests
- policy conflicts