Sang-Seung Yi

This paper argues that the sign of external effects of coalition formation provides a useful organizing principle in examining economic coalitions. In many interesting economic games, coalition formation creates eithernegativeexternalities orpositiveexternalities for nonmembers. Examples of negative externalities are research coalitions and customs unions. Examples of positive externalities include output cartels and public goods coalitions. I characterize and compare stable coalition structures

Consider an environment in which ex-ante symmetric countries can form customs unions freely. What are the welfare effects on member and non-member countries of the formation of welfare-maximizing customs unions? What are the properties of stable customs-union structures? Can one design a rule of customs-union formation which supports global free trade as an equilibrium outcome? I show that the formation of customs unions improves the aggregate welfare of member countries but reduces the welfare

This paper examines the welfare effects of the formation of a free‐trade area. When a country is constrained to charge lower tariffs on imports from some countries, it is in its interest to reduce external tariffs as well. In alinear‐quadratic model of intraindustry trade, the reduction in external tariffs induced by free‐trade agreements is sufficiently large to make nonmember countries better off. Since only privately beneficial free‐trade agreements are signed voluntarily, the formation of a

Endogenous formation of joint ventures with

This paper surveys the recent literature on the endogenous formation of economic coalitions, in particular, the partition function literature that allows for externalities across coalitions. Various economic coalitions are classified either as coalitions with positive externalities (output cartels, R&D coalitions with spillovers, public-goods (environmental) coalitions, free-trade areas) or as coalitions with negative externalities (joint ventures with efficiency gains, customs unions). I review

In this paper, I provide sufficient conditions under which the unique pure-strategy Nash equilibrium of the Cournot oligopoly model (with or without product differentiation) is also the unique correlated equilibrium. My conditions are (1) the demand function is linear, and (2) the cost function is weakly convex.

This article shows that the Pareto efficient frontier of the Nash equilibrium set of games with strategic substitutes is coalition-proof under the following conditions: (1) the game has three players, or, alternatively, a player's payoff depends on her own strategy and on the sum (but not on the composition) of other players' strategies; (2) an increase in a player's strategy either raises all other players' payoffs monotonically or reduces them monotonically; and (3) each player's payoff is str

This paper examines the optimal licensing policy of a patent holder when potential licensees differ in their capacities in absorbing the patented technology. If two-part tariffs with non-negative royalties and fixed fees are feasible, the patent holder finds it optimal to license the strong firm exclusively whether or not an exclusive licensing of the weak firm deters the strong firm from entering the market. Hence, the potential trade-offs between strategic gains associated with licensing to we

Does monopoly persist in a dynamic industry with opportunities for technological innovations? This paper points out that the persistence of monopoly under uncertain innovations depends on how R&D competition is modeled. If the incumbent and the entrant bid for a stochastic R&D technology in an auction framework as in Gilbert and Newbery (American Economic Review, 1982, 72, 514–526) before engaging in R&D competition as in Reinganum (American Economic Review, 1983, 73, 741–748), then the incumben

Consider an environment in which ex-ante symmetric countries can form customs unions freely. What are the welfare effects on member and nonmember countries of the formation of welfare-maximizing customs unions? What are the properties of stable customs-union structures? Is a symmetric customs-union structure stable? Can one design a rule of customs-union formation which supports global free trade as an equilibrium outcome? This paper shows that the formation or expansion of welfare-maximizing cu