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on Game Theory |
| By: | Dipankar Das |
| Abstract: | Traditional auction theory posits that bid value exhibits a positive correlation with the probability of securing the auctioned object in ascending auctions. However, under uncertainty and incomplete information, as is characteristic in real-time advertising markets, truthful bidding may not always represent a dominant strategy or yield a Pure Strategy Nash Equilibrium. Real-Time Bidding (RTB) platforms operationalize impression-level auctions via programmatic interfaces, where advertisers compete in first-price auction settings and often resort to bid shading, i.e., strategically submitting bids below their private valuations to optimize payoff. This paper empirically investigates bid shading behaviors and strategic adaptation using large-scale RTB auction data from the Yahoo Webscope dataset. Integrating Minority Game Theory with clustering algorithms and variance-scaling diagnostics, we analyze equilibrium bidding behavior across temporally segmented impression markets. Our results reveal the emergence of minority-based bidding strategies, wherein agents partition hourly ad slots into submarkets and place bids strategically where they anticipate being in the numerical minority. This strategic heterogeneity facilitates reduced expenditure while enhancing win probability, functioning as an endogenous bid shading mechanism. The analysis highlights the computational and economic implications of minority strategies in shaping bidder dynamics and pricing outcomes in decentralized, high-frequency auction environments. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.15717 |
| By: | Georgalos, Konstantinos (Department of Economics, Lancaster University Management School); Gonçalves, Ricardo (Católica Porto Business School, Universidade Católica Portuguesa); Ray, Indrajit (Economics Section, Cardiff Business School, Cardiff University); SenGupta, Sonali (Department of Economics, Queen’s Business School, Queen’s University Belfast) |
| Abstract: | This paper reports results from a laboratory experiment on a continuous Japanese-English auction in a common-value ‘wallet game’. The main objective is to test whether bidders follow the equilibrium bidding strategy predicted by theory. We find systematic deviations from equilibrium behaviour: instead of bidding according to the Nash equilibrium, subjects appear to rely on expected value (EV) bidding. As a consequence, observed auction prices are higher than the theoretical benchmark, and the winner’s curse occurs in a substantial fraction of auctions. We analyse bidding behaviour in detail and discuss the implications of our findings |
| Keywords: | Japanese-English auction (JEA); Wallet game; Continuous bids; Winner’s curse; Expected value bidding |
| JEL: | C72 C91 C92 D63 D83 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2025/25 |
| By: | Tomás Peruchin (Department of Economics, Universidad de San Andrés) |
| Abstract: | This thesis examines the design of petroleum exploration and production (E&P) rights auctions in Argentina, emphasizing the theoretical and policy implications of President Milei’s 2024 Ley Bases reform to Hydrocarbon Law 17, 319, which introduced royalty bidding as an alternative to the prevailing investment-commitment framework.The study develops a Bayesian auction model in which firms, facing incomplete information, compete after receiving noisy private signals regarding the tract’s underlying value. Two mechanisms are examined: (i) work-commitment bidding, where competition is based on the scale of exploration and production expenditures under a flat royalty; and (ii) royalty bidding, where firms bid a royalty rate rather than committing to a fixed investment level.The symmetric Bayesian Nash equilibrium is characterized by numerically solving coupled integro-differential equations, calibrated to the specific conditions of Argentina’s hydrocarbon sector.The analysis reveals a key policy trade-off: royalty bidding enhances government rent capture but exposes the state to greater fiscal volatility, whereas work-commitment schemes provide more stable, though typically smaller, revenue flows, limiting the upside from high-quality tracts. |
| Keywords: | Auction of Natural Resources; Bayesian Nash Equilibrium; Petroleum Contract Design; Oil and gas E&P rights; Fiscal Regimes in Extractives; Resource Rent Capture. |
| JEL: | D44 D82 H21 Q35 Q38 Q47 Q48 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:sad:ypaper:20 |
| By: | Moradipoor, Sorour; Jalaee, Seyed Abdolmajid |
| Abstract: | This paper develops a non-cooperative game-theoretic model to analyze strategic natural gas export decisions under binding geopolitical and institutional constraints, focusing on Iran–Qatar interaction in the European market. Export strategies are defined as empirically grounded regimes rather than continuous quantities, capturing observed export suspensions and partial utilization under sanctions and infrastructural frictions. The model incorporates quantity-dependent production and transportation costs as well as explicit geopolitical constraint penalties. Scenario-based payoff matrices calibrated to post-2022 market conditions reveal that rising constraint costs can render high-export strategies unprofitable even at elevated gas prices. The analysis identifies an asymmetric Nash equilibrium in which Qatar maintains high exports while Iran optimally reduces or suspends exports. These results highlight that institutional access and geopolitical frictions, rather than resource endowments alone, are central determinants of export behavior and European energy security in fragmented gas markets. Keywords: Geopolitical constraints; Natural gas exports; Game theory; European gas market; Iran–Qatar interaction; Energy security. |
| Date: | 2025–12–27 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:awh2s_v1 |
| By: | Bone, John (Department of Economics, University of York); Drouvelis, Michalis (Department of Economics, University of Birmingham; CESifo, Munich); Georgalos, Konstantinos (Department of Economics, Lancaster University Management School); Ray, Indrajit (Economics Section, Cardiff Business School, Cardiff University) |
| Abstract: | We set up an experiment to test whether players use a payoff-irrelevant public message (BLUE or RED) as a possible sunspot to coordinate in a Battle of the Sexes game. We find that players do not play a sunspot equilibrium; instead, they learn to coordinate on a focal point and stick to this focal point even after the public signal is withdrawn. |
| Keywords: | Battle of the Sexes; Coordination; Sunspots; Focal Point |
| JEL: | C72 C73 D83 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:cdf:wpaper:2025/26 |
| By: | Sreoshi Banerjee (Climate Economics and Policy, Potsdam Institute for Climate Impact Research (PIK), Member of the Leibniz Association); Christian Trudeau (Department of Economics, University of Windsor) |
| Abstract: | We study cooperative cost-sharing in scheduling problems where agents differ in job lengths but share identical waiting costs. While the optimistic and pessimistic cost functions are natural approaches to compute the waiting cost of a coalition, their symmetry—well established for queueing problems—breaks down for scheduling. In particular, the pessimistic Shapley value violates equity by rewarding longer jobs. To address this, we propose an alternative formulation, termed ``accountable cost" of serving a coalition. Under this, the coalitional members are served first, but they internalize the externality imposed on the non-coalitional members. We show that the accountable cost game is concave and the Shapley value of this game coincides with the decreasing serial rule, thereby restoring the lost symmetry. We also provide axiomatic characterizations of both the optimistic and accountable Shapley values, explore extensions to multi-server environments, and discuss connections with general sequencing problems. These results position the accountable function as a principled counterpart to the optimistic approach, unifying efficiency and fairness in the cooperative analysis of scheduling problems. |
| Keywords: | scheduling; cooperative game; cost sharing; Shapley value; serial (decreasing serial) rule. |
| JEL: | C71 D63 D71 |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:wis:wpaper:2507 |
| By: | Hiroaki Sakamoto; Christian Traeger; Christian P. Traeger |
| Abstract: | We study coalition formation with externalities under voluntary, non-binding participation. Motivated by climate agreements, where standard modeling predicts small, inefficient coalitions, we propose a new solution concept—the self-enforcing stable set. It synthesizes the self-enforcing logic of non-cooperative approaches with the consistency requirement of cooperative forward-looking stability. By endogenizing players' beliefs about the eventual outcomes of negotiations, we show that rational foresight disciplines strategic free-riding and selects constrained Pareto efficient outcomes. In canonical climate-agreement models, this yields sharp predictions: stable coalitions must be large and only mildly fragmented, aligning closely with observed participation patterns. |
| Keywords: | coalition formation, self-enforcing agreements, international agreements, public goods, climate change |
| JEL: | C71 F53 H41 Q54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12360 |
| By: | Hernan Bejerano (Center for Economic Research and Teaching (CIDE) and Economic Science Institute, Chapman University); Matias Busso (Inter-American Development Bank); Juan Francisco Santos (Inter-American Development Bank) |
| Abstract: | This paper studies trust, reciprocity, and bargaining using a large-scale online experiment in six Latin American countries. Participants were randomly assigned to play trust and ultimatum games under conditions in which the gender of their counterpart was either disclosed or withheld. On average, gender disclosure did not affect behavior. However, disaggregated results show systematic differences. Men displayed higher levels of trust and reciprocity, particularly when interacting with women, and offered larger shares to women in bargaining. Women, by contrast, reciprocated more when paired with men. These findings show how gendered interactions can influence economic behavior, even when counterpart information is conveyed minimally. |
| Keywords: | Trust; Reciprocity; Bargaining; Gender; Latin America |
| JEL: | C92 D91 J16 O54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:chu:wpaper:25-17 |
| By: | Jan H. R. Dressler; Peter Kurz; Winfried J. Steiner |
| Abstract: | Despite a substantial body of theoretical and empirical research in the fields of conjoint and discrete choice analysis as well as product line optimization, relatively few papers focused on the simulation of subsequent competitive dynamics employing non-cooperative game theory. Only a fraction of the existing frameworks explored competition on both product price and design, none of which used fully Bayesian choice models for simulation. Most crucially, no one has yet assessed the choice models' ability to uncover the true equilibria, let alone under different types of choice behavior. Our analysis of thousands of Nash equilibria, derived in full and numerically exact on the basis of real prices and costs, provides evidence that the capability of state-of-the-art mixed logit models to reveal the true Nash equilibria seems to be primarily contingent upon the type of choice behavior (probabilistic versus deterministic), regardless of the number of competing firms, offered products and features in the market, as well as the degree of preference heterogeneity and disturbance. Generally, the highest equilibrium recovery is achieved when applying a deterministic choice rule to estimated preferences given deterministic choice behavior in reality. It is especially in the latter setting that incorporating Bayesian (hyper)parameter uncertainty further enhances the detection rate compared to posterior means. Additionally, we investigate the influence of the above factors on other equilibrium characteristics such as product (line) differentiation. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22864 |
| By: | I. Sebastian Buhai |
| Abstract: | We develop a continuous-time model of reputational disclosure in directed networks of biased intermediaries with career concerns. A payoff-relevant fundamental follows a diffusion and a decision maker chooses actions to track it. Experts obtain verifiable signals that reach the decision maker only if relayed by intermediaries. Intermediaries choose whether to forward evidence and an observable disclosure clock that controls the arrival rate of disclosure opportunities. Because clocks are public, silence is state dependent: when the clock is on, delay is informative and reputationally costly; when it is off, silence is mechanically uninformative. Disclosure becomes a real option on reputational capital. Along any expert-decision maker path, Markov perfect Bayesian equilibria are ladder policies with finitely many posterior cutoffs, and clock-off windows eliminate knife-edge mixing. With sufficiently high reputational stakes and low discounting, dynamic incentives rule out persistent suppression and guarantee eventual transmission of all verifiable evidence along the path, even when bias reversals block static unraveling. We then study network design and formation. Absent the high-reputation regime, among trees exactly the bias-monotone ones sustain disclosure. Under homogeneous reputational intensities the bias-ordered line is dynamically optimal; with heterogeneous intensities, optimal design screens by topology, placing high-reputation intermediaries on direct parallel routes rather than in series. In an endogenous link-formation game, pairwise stable networks can be inefficiently sparse or redundantly dense because agents ignore the option-value externalities their links create or destroy for others' reputational assets. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.22987 |
| By: | Evan Friedman; Jeremy Ward |
| Abstract: | We elicit subjects’ beliefs over opponents’ behavior multiple times for a given game without feedback. A large majority of subjects have stochasticity in their belief reports, which we argue cannot be explained by learning or measurement error, suggesting significant noise in subjects’ unobserved “true” beliefs. Using a structural model applied to actions and beliefs data jointly, we find that such “noisy beliefs” are equally important for explaining our data as “noisy actions”—the sort of stochastic choice given fixed beliefs that is commonly assumed in empirical research. We argue that beliefs and belief-noise are driven by the payoff-salience of actions. |
| Keywords: | stochastic choice, noisy beliefs, belief elicitation |
| JEL: | C72 C92 D84 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12338 |
| By: | Kai A. Konrad; Marcel Thum |
| Abstract: | The enforcement of international sanctions is frequently undermined by multiple third-party sanction-breaking countries. This paper examines how a sanctioning country can optimally negotiate with several such loophole countries to close the enforcement gaps. We compare several sequential and simultaneous bargaining strategies. Suitably chosen sequencing, but also simultaneous negotiations under the Single-Undertaking Principle can minimize the cost to the sanctioning country by creating competitive pressure among the loophole countries. We find that, if the desire to make the sanctioning regime effective is sufficiently high, the ultimate goal of closing the sanction loopholes is achieved for all sequencing rules of ultimatum bargaining we consider. However, the equilibrium size and distribution of compensation among loophole countries differ. We characterize the optimal sequential strategy and the optimal simultaneous-offer strategy. Furthermore, for well-chosen negotiation strategies the sum of compensations paid to multiple loophole countries is lower than if there is only one loophole country. |
| Keywords: | Sanctions, Negotiations, Geoeconomics, Conflict, Trade |
| JEL: | F13 F51 C78 H56 |
| Date: | 2025–12–02 |
| URL: | https://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2025-07 |
| By: | Dongkyu Chang (City University of Hong Kong); Duk Gyoo Kim (Yonsei University); Wooyoung Lim (The Hong Kong University of Science and Technology) |
| Abstract: | In the standard dynamic screening problem between an uninformed seller and a privately informed buyer, theory suggests that the presence (absence) of the buyer's outside option leads to a substantial surplus for the seller (buyer). This outcome arises from contrasting unraveling processes that theory predicts: negative selection occurs in the absence of an outside option, while positive selection occurs in the presence of it. We examine the validity of these contrasting unraveling processes and report laboratory data that qualitatively deviate from theoretical predictions. We found that the seller's profit ranking was reversed between the two environments. In particular, in the presence of an outside option, the buyer frequently rejected current-round offers, leading to pervasive delays; and the seller's reported beliefs about the buyer's type were qualitatively more consistent with the negative selection than with the theoretically predicted positive selection. |
| Keywords: | Positive Selection, Outside Options, Laboratory Experiments |
| JEL: | C78 C91 D03 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2025rwp-272 |
| By: | M. Sadra Heydari; Zafer Kanik; Santiago Montoya-Bland\'on |
| Abstract: | We introduce heterogeneous R&D productivities into an endogenous R&D network formation model, generalizing the framework in Goyal and Moraga-Gonzalez (2001). Heterogeneous productivities endogenously create asymmetric gains for connecting firms: the less productive firm benefits disproportionately, while the more productive firm exerts greater R&D effort and incurs higher costs. For sufficiently large productivity gaps between two firms, the more productive firm experiences reduced profits from being connected to the less productive one. This overturns the benchmark results on pairwise stable networks: for sufficiently large productivity gaps, the complete network becomes unstable, whereas the Positive Assortative (PA) network -- where firms cluster by productivity levels -- emerges as stable. Simulations show that the PA structure delivers higher welfare than the complete network; nevertheless, welfare under PA formation follows an inverted U-shape in the fraction of high-productivity firms, reflecting crowding-out effects at high fractions. Altogether, a counterintuitive finding emerges: economies with higher average R&D productivity may exhibit lower welfare through (i) the formation of alternative stable R&D network structures or (ii) a crowding-out effect of high-productivity firms. Our findings highlight that productivity-enhancing policies should account for their impact on endogenous R&D alliances and effort, as such endogenous responses may offset or even reverse the intended welfare gains. |
| Date: | 2025–12 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2512.23337 |
| By: | Jansson, Fredrik |
| Abstract: | Formal modelling provides a toolkit for understanding cultural dynamics, from individual decisions to recurring patterns of change. This chapter explains what models are and why they matter. Using a precise, shared language, they aid thinking and communication by turning fuzzy assumptions into clear, comparable, testable claims. The chapter describes the modelling process, trading explanatory clarity against predictive specificity. Four families of models are surveyed, from the micro-level with optimising agents to macro-level dynamics with heuristic or even implicit agents, covering reasoning (Bayesian inference, game theory), adaptive updating (reinforcement learning, evolutionary games), mean-field approaches (compartmental models, population dynamics), and complex systems (agent-based models, social networks). Building on these, a general template for modelling cultural evolution is outlined that connects system states, cognitive processes, behaviour, and macro-level outcomes in dynamic loops, linking individuals, groups, institutions, and their environments. Taken together, these tools support a pluralist but coherent understanding of cultural change. |
| Date: | 2026–01–02 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:h4xjs_v1 |
| By: | James C. Cox (Georgia State University); Cary Deck (University of Alabama and Chapman University, Economic Science Institute); Laura Razzolini (University of Alabama); Vjollca Sadiraj (Georgia State University) |
| Abstract: | Deviations from choices predicted by self-regarding preferences have regularly been observed in standard dictator games. Such behavior is not inconsistent with conventional preference theory or revealed preference theory, which accommodate other-regarding preferences. By contrast, experiments in which giving nothing is not the least generous feasible act produce data that is inconsistent with conventional preference theory including social preference models and suggest the possible relevance of reference point models. Two such models are the reference-dependent theory of riskless choice with loss aversion and choice monotonicity in moral reference points. Our experiment includes novel treatments designed to challenge both theoretical models of reference dependence and conventional rational choice theory by poking holes in or adding to the dictator’s feasible set along with changes to the initial endowment of the players. Our design creates tests that at most one of these models can pass. However, we do not find that any of these models fully capture behavior. In part this result is due to our observing behavior in some treatments that differs from previous experiments for reasons attributable to implementation differences across studies. |
| Keywords: | Rational Choice Theory, Reference Dependence, Behavioral Models, Laboratory Experiments |
| JEL: | C7 C9 D9 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:chu:wpaper:25-13 |
| By: | Andreas Haufler; Hirofumi Okoshi; Dirk Schindler |
| Abstract: | We study the effects that the introduction of the Global Minimum Tax (GMT) has from the perspective of developing countries. Our model features two asymmetric host countries for FDI that compete with each other for the location of multinational firms, and simultaneously fight profit shifting to a tax haven. The developing country has the weaker enforcement technology to fight profit shifting; it therefore loses more revenue from profit shifting, but also becomes a more attractive location for multinationals. The GMT reduces both profit shifting and the tax-avoidance advantage of the developing country. If tax competition for real investment is sufficiently severe, the introduction of the GMT reduces tax rates and tax revenues in the developing country while tax revenues in the developed country rise. Our results help explaining the opposition of developing countries to the GMT. |
| Keywords: | global minimum tax, developing countries, tax competition |
| JEL: | F23 H26 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12329 |
| By: | Dimitrios Zormpas (Department of Economics, University of Macedonia) |
| Abstract: | This paper considers the case of a multinational corporation who holds the option to invest in a foreign country. The company incurs the investment cost and gains access to a volatile profit flow once the project becomes operational. The cost is entirely sunk so the investor must account, not only for uncertain market conditions, but also for the threat of nationalization by the local government. By employing a dynamic model that incorporates both market uncertainty and political risk we determine the optimal timing for investment and nationalization, as well as the appropriate scale of the investment. We show that a reduction in the nationalization cost induces earlier but also smaller investment and also earlier nationalization. Our findings provide a theoretical explanation for the empirical observation that investors do not necessarily avoid industries susceptible to nationalization. We argue that the threat of nationalization leads to premature and undersized investments, rather than deterring them entirely. |
| Keywords: | Nationalization, Investment analysis, Capacity Investment, Nash bargaining, Real options. |
| JEL: | C7 D8 K3 F2 O3 |
| Date: | 2025–01 |
| URL: | https://d.repec.org/n?u=RePEc:mcd:mcddps:2025_01 |
| By: | Armstrong, Mark; Vickers, John |
| Abstract: | We study a market in which firms each might supply a number of variants, or "brands", of fundamentally the same product. Consumers differ in the sets of brands they consider, and firms compete using (multi-dimensional) mixed pricing strategies. We show when firms apply uniform pricing across their brands, and when they use segmented pricing so that one "discount" brand is priced below another "premium" brand. We study the case of symmetric brands in particular, and discuss the impact of a firm introducing a new brand, of imposing a requirement to set uniform prices across brands, and of mergers between firms. |
| Keywords: | Price dispersion, price discrimination, multiproduct firms, mixed strategies, oligopoly, multibranding, multi-channel selling. |
| JEL: | C72 D43 D83 L13 M31 |
| Date: | 2025–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:127017 |
| By: | Simon Dato; Eberhard Feess; Jan-Patrick Mayer; Gerd Muehlheusser; Petra Nieken |
| Abstract: | Using a behavioral game-theoretical model and an experiment we study how information and communication influence coordination in groups when they can misreport the outcome of a binary lottery. Both group members receive a positive payoff only if their reports match. Consistent with our theory, nearly all groups coordinate when allowed to communicate prior to submitting their individual reports. The extent of coordination on either truth-telling or lying is correlated with the individual lying costs. Overall, both information and communication promote coordination on more dishonesty. These findings underscore how information and communication can increase coordination and dishonesty depending on intrinsic lying-aversion. |
| Keywords: | group decisions, unethical behavior, lying, coordination, group video chat |
| JEL: | C92 D70 D83 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12339 |
| By: | Cary Deck (University of Alabama and Economic Science Institute, Chapman University); Paul Pecorino (University of Alabama); Brian R. Powers (University of Wisconsin) |
| Abstract: | Most analyses of arbitration consider disputes over a single dimensional issue; however, in many situations more than one issue can be in dispute. In a labor context, the parties may disagree on the hourly wage, number of paid holidays, and fringe benefits as well as other conditions of employment. In addition to conventional arbitration (CA), two variants of multidimensional final-offer arbitration (FOA) are employed in practice. Under one version of FOA, the arbitrator must pick the entire package submitted by one of the disputants. Under the other version of FOA, the arbitrator can select elements from each disputant’s final offer on an issue-by-issue basis. Theoretically, we show that when disputants have different relative values between dimensions, package FOA leads to expected welfare improvements for both parties as compared to CA and issue by issue FOA. In a controlled laboratory experiment, we examine how asymmetry in relative values between issues impacts proposals and welfare under both package FOA and issue-by-issue FOA. For package FOA, we observe that asymmetry leads to proposals that are more aggressive in the more valuable dimension and more generous in the less valuable dimension, as predicted by theory. As a result, payoffs are higher under package FOA than issue-by-issue FOA or CA, even though observed treatment effects are not as large as predicted. |
| Keywords: | Arbitration; Dispute Resolution; Multi-Dimensional Bargaining; Laboratory Experiments |
| JEL: | C7 C9 J5 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:chu:wpaper:25-14 |
| By: | Afiq bin Oslan; Yixuan Shi |
| Abstract: | Political parties often appear united despite containing factions with divergent preferences. We study why party defections are rare by opening the intra-party 'black box' through a set of game-theoretical models. In the model, the leadership sets the party's policy platform anticipating exit threats from co-partisan rival factions. Rivals weigh policy proximity against the benefits of belonging to a larger party: smaller factions lack credible exit threat and remain loyal, while larger factions may require policy compromises. We emphasise the role of party size and show that unity can be sustained through a snowballing mechanism: once the leadership compromises and secures the loyalty of some factions, other factions become more willing to remain — even with no political concessions — because doing so places them with a larger and more powerful party. Leaders need only win part of the party to induce broader unity, implying that even internally diverse parties can remain stable. |
| JEL: | C72 D72 |
| Date: | 2025–12–11 |
| URL: | https://d.repec.org/n?u=RePEc:mpi:wpaper:tax-mpg-rps-2025-09 |