Effects of alternatives in coalition bargaining

A critical factor in bargaining and coalition formation is the alternative outcomes of the bargainers if an agreement cannot be reached. In some situations bargainers have individual alternatives while in other situations their alternatives must be negotiated with others. The purpose of this study was to contrast the effects of one-person and two-person alternatives on coalition outcomes. The second purpose of the study was to contrast the predictions of four theories of coalition formation: bargaining theory, equal excess model, Shapley value, and a special case of equity theory. The results indicate that one-person alternatives enhance the bargaining strength of the stronger players more than two-person alternatives. The predictions of the equal excess model and the Shapley value were more accurate than the predictions of bargaining theory and equity theory. However, the greater accuracy of the equal excess model and the Shapley value may be restricted to situations in which the bargainers have one-person rather than two-person alternatives.