Edited by Carlo Carraro
Chapter 3: Endogenous formation of economic coalitions: a survey of the partition function approach
Sang-Seung Yi 1. INTRODUCTION Coalition formation among autonomous agents is an integral part of economic activity. Examples abound from industrial organization to international trade to environment. In industrial organization, Japanese ﬁrms have established R&D alliances such as the Very Large Scale Integration (VLSI) consortium (1976–79) and the Fifth Generation Computer Project (1981–90) with the purpose of gaining an edge on international competition. Due largely to the perceived success of such Japanese cooperative projects, American ﬁrms founded the Microelectronics and Computer Technology Corporation (MCC) in 1982 and the Semiconductor Manufacturing Technology Corporation (Sematech) in 1987. In the nascent High Deﬁnition Television (HDTV) industry in the US, three research coalitions, the ZenithAT&T coalition, the NBC-Phillips-Thompson-Sarnoﬀ coalition, and the General Instruments-MIT coalition, had been competing for adoption of their own technology by the Federal Communications Commission before they formed a ‘Grand Alliance’ in 1993 at the strong urging of the Commission. In international trade, there has been a resurgence of regionalism. Casual observation suggests that the world is moving towards the formation of three major trading blocs consisting of the European Union (EU), the North American Free Trade Agreements (NAFTA) zone, and a potential Asian bloc. This new development has raised concerns that the formation of these regional trading blocs may undermine the spirit of global free trade that has been promoted in the multilateral setting of the General Agreement of Tariﬀs and Trade (GATT) (now the World Trade Organization (WTO)). In environment, international policy coordination on...
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