The Veto Mechanism Revisited

Abstract

Abstract. It is difficult to argue that coalition formation is costless and free. In this paper, only a subset of the set of all possible coalitions in an economy or a game, is considered to be really formed. The consequences that such restriction has on the veto mechanism are analyzed. The restricted veto mechanism is extended to the pondered veto mechanism with rates of participation of the the players. It is shown that it is enough to consider the veto power of a subset S of coalitions, which differs from the set of all coalitions, in order to obtain the Walrasian allocations or, alternatively, the Edgeworth equilibria. In particular, it is shown that the pondered veto power, with rates of participation arbitrarily close to one, of only one coalition, namely, the coalition of all agents, blocks any non Walrasian allocation.

Stable sets for asymmetric information economies

“…The statement of Theorem 1 (and Corollary 1 as well) could be preserved under assuming that the only possible coalitions in the society are those containing every type of trader instead of the glove market assumption. Restrictions on coalition formation are frequently encountered in the study of the core (see, for example, Hervés‐Beloso and Moreno‐García ), and especially motivated in economies with asymmetric information where the lack of communication among traders may prevent the formation of some coalitions. For a promising future line of research, it would be interesting to analyze whether the stability for the set V is preserved when economic agents are not necessarily selfish but have interdependent preferences, that is, they potentially derive utilities also from the consumption of others.…”

“…The statement of Theorem 1 (and Corollary 1 as well) could be preserved under assuming that the only possible coalitions in the society are those containing every type of trader instead of the glove market assumption. Restrictions on coalition formation are frequently encountered in the study of the core (see, for example, Hervés-Beloso and Moreno-García 2001), and especially motivated in economies with asymmetric information where the lack of communication among traders may prevent the formation of some coalitions.…”

The veto mechanism in atomic differential information economies

“…Therefore, this seems to be hard to check, unless the economy is very small. As pointed out by Hervés-Beloso and Moreno-García in [13], it may be difficult to argue that coalition formation is costless and free: "The fact that agents are organized in some way, and perhaps they are not entirely free, may result in high formation costs, commitments and constraints, which make difficult to assume that the veto mechanism works freely and spontaneously". For this reason, it is usually assumed that only a subset of the set of all possible coalitions in an economy is considered to be really formed.…”

“…For this reason, it is usually assumed that only a subset of the set of all possible coalitions in an economy is considered to be really formed. The papers [13], [14] and [15] go in this direction (see also [16] for an infinite dimensional commodity space setting). They obtain a characterization of Walrasian equilibria by using the veto power which differs substantially from the equivalences obtained by Debreu and Scarf in [5] and Aubin in [1].…”

“…Indeed, on the one hand Debreu-Scarf and Aubin enlarge the set of blocking coalitions: the former by replicating the economy, the latter by allowing the participation of the agents with any rate of their endowments. On the other hand, Hervés Beloso and Moreno García in [13], [14] and [15] consider the veto power of just one coalition, namely the grand coalition, by enlarging the possible redistribution of endowments. In other words, they consider the veto power of a single coalition in infinitely many economies obtained by perturbing the original initial endowments.…”