When three is not always two against one: Coalitions in experimental three-person cooperative games

Four models of coalition formation are tested in a computer-controlled experiment in which three players negotiated to form coalitions in order to gain rewards for themselves. Formation of the grand coalition of all three players as well as any of the three possible 2-person coalitions is permitted. The results indicate that the grand coalition is the most likely to form, followed by the coalition between the two strongest players. The individually rational bargaining set model of coalition formation is supported over an egalitarian model, the Shapley value, and the coalitionally rational bargaining set model. Various measures of the progress of negotiations are introduced, examined, and discussed in an effort to provide an increased data base for the establishment of a behavioral theory of bargaining and coalition formation.