Group for Research in Decision Analysis

Endogenous Gadual Coalition Formation and International Negotiations

Alejandro Caparrós Institute for Public Goods and Policies, Consejo Superior de Investigaciones Científicas, Spain

This article discusses a model of gradual coalition formation with externalities that fully specifies the bargaining process and in which a leading country endogenously decides whether to negotiate multilaterally or sequentially. We show that the choice is determined by the convexity of the game and by the sign of the coalition externalities. We also analyze the role of a facilitating agency that seeks a global agreement without delay but cannot impose it. The main results are derived assuming binding agreements but we also consider self-enforcing agreements. Implications for climate change and free trade negotiations are discussed.