Self-interest and fairness in coalition formation: A social utility approach to understanding partner selection and payoff allocations in groups

In this chapter we present a social utility approach to coalition formation. The central tenet of our approach is that outcome allocations and partner selection in multiparty situations are affected by self-interest and fairness. Inspired by the social utility model we argue that the relative weight assigned to both components is affected by structural aspects of the situation and individual characteristics of the negotiators. We first investigate how coalition bargainers substantiate their coalition demands. We show that bargainers are self-serving in their choice of allocation rules, indicating that perceptions of fairness can be coloured by self-interest. Second, we investigate how the alignment of self-interest and fairness fosters the formation of coalitions that maximise the payoffs of its members. Finally, we present a series of experiments that expands the notion of being fair to those who are excluded from a coalition. We show that bargainers are reluctant to benefit themselves when this harms the outcomes of others and that this is dependent on personal factors (e.g., social value orientations), situational factors (e.g., the valence of outcomes), and whether bargainers negotiate in an interindividual or in an intergroup setting.