Stable Coalition Structures with Fixed Decision Scheme

This paper studies the stability of coalition structures when coalitions must choose an alternative in a one-dimensional space, using a fixed decision scheme. This decision scheme depends on the preferred alternative of all agents in the coalition. We assume that the number of agent is finite. Hence, when an agent, or a group of agent, leaves a coalition and enter in another coalition, this will affect the outcome of the decision scheme in the former and the new coalitions. We provide in this paper sufficient conditions for the existence of stable coalition structures, for two stability concepts, namely C-stability and Tiebout-stability. The model presented here can be understood as a local public good economy with horizontal differentiation.