Economic Theory Seminar - Mert Kimya (USYD)

Title: Title: Power, Coalitions and the Stability of Hierarchies

Abstract: A social hierarchy assigns a level to each player that determines the individual’s status. Each player has a preference defined over the set of hierarchies. Coalitions with enough power can move up the hierarchy by removing the incumbent coalition. We define a notion of stability and a notion of weak stability for hierarchies. We show that a weakly stable hierarchy always exists, we provide sufficient conditions for the existence of a stable hierarchy and we provide a characterization of both stable and weakly stable hierarchies. We then analyse the stable and weakly stable hierarchies in three specific applications. In one of the applications nobility and wealth is the driver of status and players have preference for similarity. In the second application we study faction formation within a political party where players simultaneously care about the policy of the faction and the exclusivity the faction provides. The third application studies an environment where the common preferences are defined over the observable attributes of the players.