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Coalitions, Leadership, and Social Norms: The Power of Suggestion in Games
Coalitions, Leadership, and Social Norms: The Power of Suggestion in Games
Games and Economic Behavior.
1992, Vol. 4, Pages 72-100
This paper examines the set of outcomes sustainable by a leader with the power to make suggestions in games. By acting as focal points, these suggestions are important even if players can communicate and form coalitions. For finite-horizon games, I show that sustainable outcomes are supported by “scapegoat” strategies, which hold a single player accountable for the actions of a group. For infinite-horizon, two-player repeated games, I show that by using an appropriate sequence of punishments and rewards, a leader can induce sufficiently patient players to play any feasible, individually rational outcome. Finally, leadership power is shown to increase if coalitions must consider the credibility of deviations in a manner similar to Coalition-Proof Nash Equilibrium.