∗
YiYou Yang
†
April 18, 2011
Abstract
K´oczy and Lauwers (2004, 2007) show that the collection of absorbing outcomes,
i.e., the coalition structure core, of a TU game, if nonempty, is a minimal dominant
set. The paper complements the result in two respects. First, it is shown that the
coalition structure core, if nonempty, can be reached from any outcome via a se
quence of successive blocks in quadratic time. Second, we observe that an analogous
result holds for accessible outcomes, namely, the collection of accessible outcomes, if
nonempty, is a minimal dominant set. Moreover, we give an existence theorem for
accessible outcomes, which implies that the minimal dominant set of a cohesive game
is exactly the coalition structure core or the collection of accessible outcomes, either
of which can be reached from any outcome in linear time.
JEL classiﬁcation numbers: C71; C73
Keywords: coalition formation; core; coalition structure core; accessible outcomes;
absorbing outcomes
1 Introduction
The issue of disequilibrium processes of successive coalition formation in the environment
of coalitional games with transferable utility (TU games) has received increasing attention
in recent years. Following Hars´anyi (1974), relevant studies include Shenoy (1979, 1980),
Sengupta and Sengupta (1994, 1996), Lauwers (2002), K´oczy (2006), K´oczy and Lauwers
(2004, 2007), Yang (2010) and B´eal et al. (2010).
Consider an outcome (a payoﬀ vector with a coalition structure) which is proposed as
a solution for a TU game. In case there exists some coalition S whose members can gain
by forming S, the members of S may deviate to obtain a higher aggregate payoﬀ, thereby
leading to an alternative outcome according its myopic preferences. Based on the obser
vation that outsiders’ payoﬀs are not aﬀected by the formation of the deviating coalition,
K´oczy and Lauwers (2004) introduce the notion of outsiderindependent dominance to
∗
We thank two anonymous referees for valuable suggestions. Support by National Science Council of
Republic of China under grant NSC 962115M156004 is gratefully acknowledged.
†
Department of Applied Mathematics, Aletheia University, New Taipei City 251, Taiwan. Email
address: yyyang@mail.au.edu.tw
1
formulate such a transition from one outcome to another, and interpret a sequence of suc
cessively outsiderindependent dominating outcomes as a process of coalition formation.
We are interested in which outcomes the process may lead to.
A collection of outcomes is called an accessible set if it can be reached from any initial
outcome via a ﬁnite sequence of dominating outcomes, and an absorbing set is a region Θ
of the outcome space such that once the trajectory of a coalition formation process enters
Θ, from which it can never escape. In particular, an outcome a is called an accessible (re
spectively absorbing) outcome if the singleton {a} is an accessible (respectively absorbing)
set.
K´oczy and Lauwers (2004) prove that the coalition structure core (Aumann and Dr`eze,
1974) consisting of all absorbing outcomes, if nonempty, is a minimal accessible set.
Moreover, K´oczy and Lauwers (2007, Theorem 4) introduce a certain similarity relation
on the outcome space and show that the accessibility of the coalition structure core can
be met in a bounded number of blocks, where the bound is given in terms of the number
of similarity classes and is at least exponential in the number of players. To sharpen the
result, we show that the bound can be reduced signiﬁcantly: The coalition structure core
can be reached from any outcome in quadratic time.
On the other hand, we note that an analogous result holds for the collection of accessible
outcomes in a dual sense, namely, the set of accessible outcomes, if nonempty, is a minimal
absorbing set. The question is when a game would possess an accessible outcome. In the
search for an existence theorem for accessible outcomes, we focus on the class of cohesive
games
1
and show that every cohesive game with no absorbing outcome must possess
accessible outcomes.
Some implications of our results are concerned with the minimal dominant sets. An
accessible set is said to be a dominant set if it is also an absorbing set. K´oczy and Lauwers
(2007) prove that each game generates a unique minimal dominant set and argue that the
minimal dominant set is a nonempty extension of the coalition structure core. In case
the game under consideration is cohesive, we prove that (i) the minimal dominant set
coincides with either the coalition structure core or the set of absorbing outcomes; (ii) the
minimal dominant set can be reached from any outcome in linear time.
The paper is organized as follows. Section 2 introduces relevant deﬁnitions and no
tations. In Section 3, we provide a quadratic bound for the time needed to reach the
coalition structure core and a counterexample related to one of Sengupta and Sengupta’s
(1994) results. Finally, we apply an existence theorem for accessible outcomes to analyze
the minimal dominant set of a cohesive game in Section 4, and present two proofs in the
Appendices.
2 Preliminaries
A coalitional game with transferable utility or simply a game is a pair (N, v), where N =
{1, . . . , n} is a ﬁnite set of players and v, the characteristic function, assigns to each
1
A game is cohesive if the grand coalition structure is the only coalition structure that maximizes the
sum of the values of all its coalitions.
2
subset S of N a value v (S) ∈ R with v (∅) = 0. A coalition is a nonempty subset of N. A
coalition structure is a set of mutually exclusive coalitions that exhaust N. Let Π denote
the collection of coalition structures.
Let S be a coalition and P ∈ Π. The coalition structure P (S) is deﬁned by
P (S) := {S} ∪ {{i} : i ∈ P (S, P) \S} ∪ {T ∈ P : T ∩ S = ∅} ,
where P (S, P) is called the partners’ set of S in P and is deﬁned to be the union of the
coalitions in P that intersect S, i.e.,
P (S, P) :=
_
T∈P;
T∩S=∅
T.
Moreover, let R denote the singleton coalition structure, i.e., R = {{i} : i ∈ N}, then
R(S) = {S} ∪ {{i} : i ∈ N\S} .
A payoﬀ vector x =
_
x
1
, . . . , x
n
_
is a realvalued function on N. For any coalition S,
let x
S
denote the projection of x on S and let x(S) be a shorthand for
i∈S
x
i
. When a
payoﬀ vector y is considered as a reference point, the set O(x, y) of “overpaid players” is
deﬁned to be O(x, y) =
_
i ∈ N : x
i
> y
i
_
.
An outcome of a game (N, v) is a pair (x, P) , where P ∈ Π is a coalition structure
and x ∈ R
N
is a payoﬀ vector satisfying (i) x
i
≥ v ({i}) for all i ∈ N and (ii) x(S) = v (S)
for all S ∈ P. The ﬁrst condition is interpreted as individual rationality and the second
condition is known as group rationality for coalition structure P. Let Ω(N, v) denote the
set of all outcomes of the game (N, v). Clearly, Ω(N, v) is never empty. A payoﬀ vector
x is called an imputation of a game (N, v) if (x, {N}) ∈ Ω(N, v).
A game (N, v) is said to be cohesive if the grand coalition N can produce value strictly
more than the sum of values of the coalitions in any partition of the grand coalition, i.e.,
S∈P
v (S) < v (N) for all P ∈ Π with P ={N}.
A game (N, v) is said to be zeronormalized if v ({i}) = 0 for all i ∈ N. Note that for
any outcome (x, P) of a zeronormalized game, v (S) ≥ 0 for all S ∈ P. For simplicity, we
assume throughout that all games are zeronormalized.
Consider an outcome (x, P) that is proposed as a solution for a game (N, v). If some
coalition S can improve upon x, in order to obtain a higher aggregate payoﬀ, the members
of S may deviate to form coalition S. In that case, the deviation may lead to an alternative
outcome (y, Q) satisfying
D1 S ∈ Q, v (S) > x(S) and y
i
≥ x
i
for all i ∈ S, and
D2 for all T ∈ P with T ⊆ N\P (S, P), T ∈ Q and y
T
= x
T
.
Condition D1 means that no member of the deviating coalition loses. Condition D2,
introduced by K´oczy and Lauwers (2004), is known as the outsider independence condition,
which reﬂects the observation that the formation of the deviating coalition does not aﬀect
outsiders’ payoﬀs.
3
Deﬁnition 1 Let (x, P) and (y, Q) be two outcomes of a game (N, v). We say that (y, Q)
outsiderindependently dominates (x, P) by S (henceforth (y, Q) o.i.dominates (x, P) by
S), denoted by (x, P)
S
−→ (y, Q), if conditions D1 and D2 both hold.
We say that the outcome (y, Q) is accessible from (x, P), and write (x, P) (y, Q), if
one of the following conditions holds:
(i) (x, P) = (y, Q), or
(ii) there exist a sequence of outcomes {(x
j
, P
j
)}
l
j=0
and a sequence of coalitions {S
j
}
l
j=1
such that
(x, P) = (x
0
, P
0
)
S
1
−→ (x
1
, P
1
)
S
2
−→ · · ·
S
l
−→ (x
l
, P
l
) = (y, Q) , (1)
where the index j can be interpreted as time and the sequence of successive blocks
(1) is called an o.i.dominating chain of length l.
An o.i.dominating chain describes a possible trajectory of a coalition formation pro
cess. The question is what the “ﬁnal” outcomes might be.
Deﬁnition 2 Let (N, v) be a game and let Θ be a subset of Ω(N, v). We consider two
conditions on Θ.
Accessible condition: The set Θ is called an accessible set if for any outcome (x, P) ∈
Ω(N, v), there exists an outcome (y, Q) ∈ Θ such that (x, P) (y, Q).
Absorbing condition: The set Θ is called an absorbing set if for each outcome (y, Q),
(x, P) (y, Q) for some (x, P) ∈ Θ implies (y, Q) ∈ Θ.
In particular, when Θ consists of a single outcome (x, P), i.e., Θ = {(x, P)}, the
outcome (x, P) is called an accessible (respectively absorbing) outcome if Θ is an accessible
(respectively absorbing) set. Finally, an accessible (respectively absorbing) set Θ is called
a minimal accessible (respectively absorbing) set if it is minimal for inclusion.
The accessible condition guarantees the existence of paths leading to an accessible set.
The absorbing condition means that once the trajectory of a coalition formation process
enters an absorbing set, from which it can never escape. K´oczy and Lauwers (2007)
introduce the notion of dominant set, which encompasses the merits of the accessible sets
and the absorbing sets, and show that every game possesses a unique minimal dominant
set.
Deﬁnition 3 A subset Θ of outcomes of a game (N, v) is called a dominant set if it
satisﬁes both accessible and absorbing conditions. A dominant set Θ is called a minimal
dominant set if it is minimal for inclusion.
4
3 The coalition structure core is accessible
The coalition structure core of a game (N, v), abbreviated as c.s.core, is deﬁned to be
C (N, v) = {(x, P) ∈ Ω(N, v) : x(S) ≥ v (S) for all S ⊆ N} .
Put diﬀerently, the c.s.core equals the collection of all absorbing outcomes. Moreover,
the collection of absorbing outcomes in which the grand coalition forms is called the core
of (N, v).
Let e
S
∈ R
N
denote the characteristic vector for a coalition S whose ith coordinate is
1 if i ∈ S and 0 otherwise. A collection B of coalitions is called Nbalanced if there exists
a set of positive weights {λ
S
}
S∈B
such that
S∈B
λ
S
· e
S
= e
N
. A game (N, v) is said to
be balanced if for any Nbalanced collection B with weights {λ
S
}
S∈B
,
S∈B
λ
S
· v (S) ≤ v (N) .
Bondareva (1963) and Shapley (1967) independently prove that a game possesses a
nonempty core if and only if it is a balanced game. From this it follows that for any game
(N, v),
C (N, v) = ∅ if and only if
S∈B
λ
S
· v (S) ≤ max
P∈Π
C∈P
v (C) (2)
for all Nbalanced collections B with positive weights {λ
S
}
S∈B
.
2
K´oczy and Lauwers (2004) prove that the c.s.core, if nonempty, is the unique minimal
accessible set by giving an algorithm
3
that constructs for each outcome an o.i.dominating
chain terminating in the c.s.core. Moreover, in order to estimate the time required to
reach the c.s.core, K´oczy and Lauwers (2007) deﬁne a certain similarity relation, which
partitions the outcome space into a ﬁnite number of similarity classes, and give an upper
bound,
τ (n) = 2
n
×(the number of similarity classes of outcomes),
for the number of blocks needed to enter the c.s.core, where n is the number of players
in the game considered.
However, the bound is unsatisfactory in two respects. First, the bound τ (n) depending
on the number of similarity classes of outcomes is not described explicitly. Secondly, since
the bound is at least exponential in the number of players, it grows at a rapid rate when
the number of players increases.
The following theorem shows that the bound can be lowered signiﬁcantly to be quadratic.
In particular, the bound can even be reduced to be linear in case the core is nonempty.
This means that the existence of the core may help to reduce the time needed to terminate
at an absorbing outcome.
Theorem 4 Let (N, v) be an nplayer game with a nonempty c.s.core.
2
For details, see, e.g., Greenberg (1994).
3
We summerize the algorithm in Appendix A.
5
(a) The c.s.core can be reached from any outcome via an o.i.dominating chain of length
at most n· [n/2] +n−1, where [n/2] denotes the integer such that n/2−1 < [n/2] ≤
n/2.
(b) In case the core is nonempty, the c.s.core can be reached from any outcome via an
o.i.dominating chain of length at most 2n −1.
Proof. See Appendix A.
In contrast to K´oczy and Lauwers (2004), Sengupta and Sengupta (1994, Theorem 2
)
focus on the core and use a weaker dominance relation, in which the outsider independence
condition is ignored, to study the accessibility of the core, and claim that the core, if non
empty, can be reached from any nonabsorbing outcome through a sequence of successively
dominating outcomes. However, an example of a simple threeplayer game shows that this
result is incorrect.
Example 5 Consider a threeplayer game in which
v (S) =
_
1, if S = N or S = {1, 2} ,
0, otherwise.
Then the core consists of outcomes ((t, 1 −t, 0) , {N}) with 0 ≤ t ≤ 1. Let a = ((0, 0, 1) , {N}).
It is easily checked that an outcome b = (y, Q) dominates a if and only if b ∈ C (N, v) and
Q = {{1, 2} , {3}}. This implies that the core cannot be reached from a via a sequence of
dominating outcomes.
By Theorem 4(b) and the observation that the core of a cohesive game must coincide
with the c.s.core, we immediately obtain a correct restatement of Sengupta and Sengupta’s
Theorem 2
.
Corollary 6 Let (N, v) be a cohesive game with a nonempty core. Then the core (c.s.
core) can be reached from any outcome via an o.i.dominating chain of length at most
2n −1.
Another branch of the literature, initiated by Sengupta and Sengupta (1996), addresses
the accessibility of the core by adopting an alternative transition process, along which every
dominating counterproposal must be individually rational and eﬃcient, i.e., an imputation.
Following the approach, B´eal et al. (2010) show that for any game with a nonempty core,
a process of successively dominating imputations could terminates at a core imputation
in quadratic time.
4
As a complement to their result, Theorem 4(b) shows that when
eﬃciency of counterproposals is not an issue, the upper bound for the number of blocks
required to reach a core imputation could be reduced to become linear.
4
We are grateful to a referee for pointing this reference to us.
6
4 The minimal dominant set of a cohesive game
K´oczy and Lauwers (2007) observe that the minimal dominant set is a nonempty extension
of the c.s.core, i.e., the minimal dominant set is never empty yet coincides with the c.s.
core when the c.s.core is nonempty. This result could be rephrased and slightly extended
as follows.
Theorem 7 The collection of accessible (or absorbing) outcomes, if nonempty, coincides
with the unique minimal dominant set.
Proof. Let Θ be the collection of accessible outcomes. Assume Θ = ∅. Clearly, Θ must
be an accessible set. It suﬃces to show that Θ is a minimal absorbing set.
Let (x, P) ∈ Θ and let (y, Q) be an outcome such that (x, P) (y, Q). Since is
a transitive relation, (y, Q) is also an accessible outcome, i.e., (y, Q) ∈ Θ. This implies
that Θ is an absorbing set. Combining with the fact that Θ must be a subset of every
absorbing set, we obtain the desired result.
However, many games possess neither an absorbing outcome nor an accessible outcome.
An example of a ﬁveplayer game inspired by K´oczy and Lauwers (2007) is as follows.
Example 8 Consider the ﬁveplayer game (N, v) given by
v ({1, 2}) = v ({1, 3}) = v ({2, 3}) = 3/4,
v ({1, 2, 3}) = v ({4, 5}) = 1,
v (S) = 0, otherwise.
Let B = {S
i
}
4
i=1
be an Nbalanced collection with weights {λ
i
}
4
i=1
given by
S
1
= {1, 2} , S
2
= {1, 3} , S
3
= {2, 3} , S
4
= {4, 5} ,
and
λ
1
= λ
2
= λ
3
= 1/2, λ
4
= 1.
Then
max
P∈Π
S∈P
v (S) = v ({1, 2, 3}) + v ({4, 5})
= 2 < 17/8 =
4
i=1
λ
i
· v (S
i
)
and hence C (N, v) = ∅ by (2). However, it is not diﬃcult to check that for each outcome
(x, R(S
4
)), (x, R(S
4
)) (y, Q) implies x
S
4
= y
S
4
and S
4
∈ Q. Hence, there is no
outcome (y, Q) satisfying
((0, 0, 0, 1/3, 2/3) , R(S
4
)) (y, Q)
and
((0, 0, 0, 2/3, 1/3) , R(S
4
)) (y, Q)
simultaneously.
7
In the following, we give an existence theorem for accessible outcomes.
Theorem 9 Every cohesive game (N, v) with C (N, v) = ∅ possesses a nonempty set of
accessible outcomes, which can be reached from any outcome via an o.i.dominating chain
of length at most 2n + 3.
Proof. See Appendix B.
Combining Corollary 6 and Theorems 7 and 9, we immediately obtain the following
result concerning the minimal dominant set of a cohesive game.
Theorem 10 Let (N, v) be a cohesive game.
(a) The minimal dominant set of (N, v) is just either the c.s.core or the set of accessible
outcomes.
(b) The minimal dominant set of (N, v) can be reached from any outcome via an o.i.
dominating chain in linear time.
In addition, it is not diﬃcult to check that the result of Theorem 10(a) holds for all
threeplayer games as well. For brevity, we omit the details here.
K´oczy and Lauwers (2007) introduce a classiﬁcation of outcomes, which gives further
insights in the structure of the minimal dominant set.
Theorem 11 (See K´oczy and Lauwers, 2007, Theorem 19.) Let (x, P) be an out
come in the minimal dominant set of a game (N, v). Let (y, P) ∈ Ω(N, v) be an outcome
such that for each coalition D, for each partition D of D, and A ∈ D
x(A) +
S∈D\A
v (S) ≥ v (D) if and only if (3)
y (A) +
S∈D\A
v (S) ≥ v (D) .
Then (y, P) belongs to the minimal dominant set of (N, v).
Two outcomes (x, P) and (y, Q) of a game are said to be similar, denoted by (x, P) ∼
(y, Q), if P = Q and Condition (3) holds. In other words, Theorem 11 means that the
minimal dominant set coincides with the union of some of the similarity classes. This
result, together with the proof of Theorem 9 and Theorem 10(a), gives a simple method
to ﬁnd the collection of accessible outcomes (the minimal dominant set) of a cohesive,
unbalanced game as follows.
5
Consider a cohesive game (N, v) with an empty core. We ﬁrst ﬁnd an accessible
outcome a ∈ Ω(N, v) according to the proof of Theorem 9. By Theorems 10(a) and 11, it
is clear that each member of a’s similarity class is an accessible outcome. Furthermore, in
case an outcome b o.i.dominates some accessible that is similar to a, b is accessible, and
so is any outcome c with c ∼ b. Since the number of similarity classes is ﬁnite, we could
inspect all the similarity classes and then determine the set of accessible outcomes.
5
Based on Theorem 11, K´ oczy and Lauwers (2007) develop an algorithm to determine the minimal
dominant set. The method given here is slightly diﬀerent from theirs.
8
Appendix A. Proof of Theorem 4
The proof of Theorem 4 proceeds via the following lemma.
Lemma 12 Let (N, v) be a game with (y, Q) ∈ C (N, v). Let m denote the number of
nonsingleton coalitions in Q and let
Γ(N, v, Q) = {(x, P) ∈ Ω(N, v) : x(S) = v (S) for all S ∈ Q} .
Let (x
0
, P
0
) be a nonabsorbing outcome and let r = O(x
0
, y) denote the number of
overpaid players.
(a) For any outcome (x, P) / ∈ Γ(N, v, Q), x(S) < v (S) for some S ∈ Q.
(b) If (x
0
, P
0
) / ∈ Γ(N, v, Q), then there exists an outcome (x
∗
, P
∗
) ∈ Γ(N, v, Q) that
is accessible from (x
0
, P
0
) via an o.i.dominating chain of length at most m with
O(x
∗
, y) ⊆ O(x
0
, y).
(c) If (x
0
, P
0
) ∈ Γ(N, v, Q), then there exists an outcome (x
1
, P
1
) that o.i.dominates
(x
0
, P
0
) by some coalition S
1
/ ∈ Q such that O(x
1
, y) O(x
0
, y).
(d) The c.s.core can be reached from (x
0
, P
0
) via an o.i.dominating chain of length at
most r · (m + 1) + m.
Proof. The proof strongly relies on an algorithm by K´oczy and Lauwers (2004). We
summarize their algorithm (henceforth KL algorithm) in the following:
Input: A game (N, v) with C (N, v) = ∅ and a nonabsorbing outcome (x
0
, P
0
).
Step 1 Pick an outcome (y, Q) ∈ C (N, v) as a reference point
6
.
Step 2 For each positive integer k, do the following loop:
(a) If there exists a coalition S
k
∈ Q with v (S
k
) > x
k−1
(S
k
), then let P
k
=
P
k−1
(S
k
) and deﬁne an outcome (x
k
, P
k
) satisfying (x
k−1
, P
k−1
)
S
k
−→ (x
k
, P
k
)
as follows:
(i) If S
k
∩ O(x
k−1
, y) = ∅, deﬁne x
k
by
x
i
k
=
_
¸
¸
¸
_
¸
¸
¸
_
x
i
k−1
+
v(S
k
)−x
k−1
(S
k
)
S
k
∩O(x
k−1
,y)
, if i ∈ S
k
∩ O(x
k−1
, y) ,
x
i
k−1
, if i ∈ S
k
\O(x
k−1
, y) ,
v ({i}) , if i ∈ P (S
k
, P) \S
k
,
x
i
k−1
, otherwise.
(4)
6
K´ oczy and Lauwers (2004) impose an additional condition on the reference point. For simplicity, we
omit it here.
9
(ii) If S
k
∩ O(x
k−1
, y) = ∅, deﬁne x
k
by
x
i
k
=
_
_
_
x
i
k−1
+ t
k
· (y
i
−x
i
k−1
), if i ∈ S
k
,
v ({i}) , if i ∈ P (S
k
, P) \S
k
,
x
i
k−1
, otherwise,
(5)
where 1 ≥ t
k
=
v(S
k
)−x
k−1
(S
k
)
y(S
k
)−x
k−1
(S
k
)
> 0.
Else choose a coalition S
k
/ ∈ Q with v (S
k
) > x
k−1
(S
k
), let P
k
= P
k−1
(S
k
),
and deﬁne an outcome (x
k
, P
k
) satisfying (x
k−1
, P
k−1
)
S
k
−→ (x
k
, P
k
) as follows:
(i) If S
k
∩ O(x
k−1
, y) = ∅, deﬁne x
k
by (4) .
(ii) If S
k
∩ O(x
k−1
, y) = ∅, deﬁne x
k
by (5) .
(b) If (x
k
, P
k
) ∈ C (N, v) exit loop. Else take the next integer k + 1.
Step 3 Stop.
Output: An o.i.dominating chain of ﬁnite length that terminates in the c.s.core.
Note that, by (4) and (5), the o.i.dominating chain generated by the KL algorithm
(x
0
, P
0
)
S
1
−→ (x
1
, P
1
)
S
2
−→ · · ·
S
l
−→ (x
l
, P
l
)
S
l+1
−→ · · ·
comes with a sequence of sets of overpaid players
O(x
0
, y) ⊇ O(x
1
, y) ⊇ · · · ⊇ O(x
l
, y) ⊇ · · · . (6)
By proving that there does not exist a positive integer p satisfying O(x
q
, y) = O(x
p
, y) = ∅
for q ≥ p, K´oczy and Lauwers show that the KL algorithm will not go in an inﬁnite loop.
(a) Suppose, to the contrary, that there is an outcome (x, P) / ∈ Γ(N, v, Q) such that
x(S) ≥ v (S) = y (S) for all S ∈ Q, then x(N) ≥ y (N). Since (y, Q) ∈ C (N, v),
x(N) ≤ y (N) and hence x(N) = y (N). This implies x(S) = v (S) for all S ∈ Q, i.e.,
(x, P) ∈ Γ(N, v, Q). This is impossible.
(b) Assume that (x
0
, P
0
) / ∈ Γ(N, v, Q), by (a), x
0
(S
1
) < v (S
1
) for some coalition
S
1
∈ Q. Using the KL algorithm, we may construct an outcome (x
1
, P
1
) such that P
1
=
P
0
(S
1
), O(x
1
, y) ⊆ O(x
0
, y) and (x
0
, P
0
)
S
1
−→ (x
1
, P
1
). In case (x
1
, P
1
) ∈ Γ(N, v, Q), we
obtain the desired result. Otherwise, by (a), we may inductively apply the KL algorithm
to construct an o.i.dominating chain,
(x
0
, P
0
)
S
1
−→ (x
1
, P
1
)
S
2
−→ · · ·
S
l
−→ (x
l
, P
l
) = (x
∗
, P
∗
) , (7)
such that S
j
∈ Q, P
j
= P
j−1
(S
j
) and O(x
j
, y) ⊆ O(x
j−1
, y) for j = 1, . . . , l and (x
∗
, P
∗
) ∈
Γ(N, v, Q). Since S
j
= S
k
for j = k, the length of the resulting chain (7) must be less
than or equal to the number of nonsingleton coalitions in Q, i.e., l ≤ m.
10
(c) Assume that (x
0
, P
0
) ∈ Γ(N, v, Q) \C (N, v). Then x
0
(S
1
) < v (S
1
) for some
coalition S
1
/ ∈ Q. Let P
1
= P
0
(S
1
) and
U = P (S
1
, Q) =
_
T∈Q;
T∩S
1
=∅
T.
Since (x
0
, P
0
) ∈ Γ(N, v, Q), we obtain x
0
(U) = y (U). This implies
O(x
0
, y) ∩ (U\S
1
) = ∅. (8)
Indeed, if O(x
0
, y) ∩(U\S
1
) = ∅ then x
0
(U\S
1
) ≤ y (U\S
1
) and hence v (S
1
) > x
0
(S
1
) ≥
y (S
1
). Since (y, Q) ∈ C (N, v), this is impossible.
Now we deﬁne an outcome (x
1
, P
1
) such that (x
0
, P
0
)
S
1
−→ (x
1
, P
1
) according to the K
L algorithm. Note that O(x
1
, y) = O(x
0
, y) \(U\S
1
), which is a proper subset of O(x
0
, y)
by (8).
(d) By (b) and (c), the sequence of sets of overpaid players (6) generated by the
execution of the KL algorithm must satisfy
O(x
k+m+1
, y) O(x
k
, y) for all k. (9)
Since (y, Q) ∈ C (N, v), we see that for any outcome (x, P) ∈ Γ(N, v, Q), O(x, y) = ∅
implies x = y and hence (x, P) ∈ C (N, v). Combining with (9), we obtain the desired
result.
We are now ready to prove Theorem 4. Observe that the numbers m and r used in
Lemma 12 must satisfy
(i) m ≤ [n/2] and r ≤ n −1; and
(ii) m = 1 if (y, Q) belongs to the core.
Combining with Lemma 12(d), we obtain the desired results.
Appendix B. Proof of Theorem 9.
The proof of Theorem 9 requires the following lemma.
Lemma 13 Let (N, v) be a game and let B be an Nbalanced collection with weights
{λ
S
}
S∈B
that maximizes the amount
S∈B
λ
S
· v (S).
(a) For any S ∈ B, the core of the subgame
_
S, v
S
_
is nonempty, where the characteristic
function v
S
is given by v
S
(T) = v (T) for all T ⊆ S.
(b) If C (N, v) = ∅, then for any outcome (x, P), there exists a coalition T ∈ B such that
v (T) > x(T).
11
Proof. (a) Suppose, to the contrary, that there exists S ∈ B such that the core of
_
S, v
S
_
is empty. Then
_
S, v
S
_
is not balanced and hence there is an Sbalanced collection B
with
weights {λ
T
}
T∈B
satisfying
T∈B
λ
T
· v (T) > v (S) .
This implies that B
∪ (B\ {S}) is an Nbalanced collection with weights
_
λ
S
· λ
T
_
T∈B
∪ {λ
C
}
C∈B\{S}
and
T∈B
λ
S
· λ
T
· v (T) +
C∈B\{S}
λ
C
· v (C) >
C∈B
λ
C
· v (C) .
This is impossible.
(b) Let (x, P) ∈ Ω(N, v). Assume that C (N, v) = ∅. By (2), we have
S∈B
λ
S
· v (S) >
S∈P
v (S) = x(N) =
S∈B
λ
S
· x(S) .
This implies v (T) > x(T) for some T ∈ B.
Now we begin to prove Theorem 9. Let B be an Nbalanced collection with weights
{λ
S
}
S∈B
that maximizes the amount
S∈B
λ
S
· v (S). Let
¯
B denote the set of coalitions in
B with the highest value and let S
∗
be a minimal element (for inclusion) in
¯
B.
By Lemma 13(a), the core of
_
S
∗
, v
S
∗
_
is nonempty. Hence, there exists an outcome
(y
∗
, R(S
∗
)) satisfying
y
∗
(C) ≥ v (C) for all C ⊆ S
∗
. (10)
Let (x
0
, P
0
) be any given outcome. We ﬁrst prove that there exists an outcome
(x
∗
, R(S
∗
)) that is accessible from (x
0
, P
0
) via an o.i.dominating chain of length at most
3. Since (N, v) is cohesive, (x
0
, P
0
) is o.i.dominated by some outcome (x
1
, {N}). By
Lemma 13(b), there exists a coalition T ∈ B with v (T) > x
1
(T) . This implies that
(x
1
, {N}) is o.i.dominated by some outcome (x
2
, R(T)) satisfying x
i
2
> 0 for all i ∈ T.
In case T = S
∗
, let x
∗
= x
2
. In case T = S
∗
, by the selection of coalition S
∗
, it is not
diﬃcult to derive that v (S
∗
) > x
2
(S
∗
) and hence (x
2
, R(T)) is o.i.dominated by some
outcome (x
3
, R(S
∗
)). In this case, let x
∗
= x
3
.
Next, we show that (y
∗
, R(S
∗
)) is accessible from (x
∗
, R(S
∗
)) through an o.i.dominating
chain of length at most 2n by constructing a sequence of outcomes
(x
∗
, R(S
∗
)) = (x
∗0
, R(S
∗
)) (x
∗1
, R(S
∗
)) (x
∗2
, R(S
∗
)) · · · .
For each outcome (x
∗j
, R(S
∗
)), we denote A
j
=
_
i ∈ S
∗
: x
i
∗j
> 0
_
.
Inductively, suppose that the sequence of outcomes {(x
∗k
, R(S
∗
))}
j
k=0
has been con
structed to satisfy (x
∗k−1
, R(S
∗
)) (x
∗k
, R(S
∗
)) and A
k
= ∅ for k = 1, . . . , j. By
Lemma 13(b), there exists T
j
∈ B satisfying v (T
j
) > x
∗j
(T
j
) = x
∗j
(T
j
∩ A
j
) . Since
12
x
∗j
(A
j
) = v (S
∗
) ≥ v (T
j
), we obtain x
∗j
(A
j
) > x
∗j
(T
j
∩ A
j
) and hence T
j
∩ A
j
must be
a proper subset of A
j
. We consider two cases.
Case I. T
j
∩ A
j
= ∅. In case T
j
\S
∗
= ∅, i.e., T
j
S
∗
, then v (T
j
) < v (S
∗
) . We
respectively deﬁne the outcomes (z
j
, R(T
j
)) and (x
∗j+1
, R(S
∗
)) by
z
i
j
=
_
x
i
∗j
+
1
T
j
∩A
j

· [v (T
j
) −x
∗j
(T
j
∩ A
j
)] , if i ∈ T
j
∩ A
j
,
0, otherwise,
and
x
i
∗j+1
=
_
z
i
j
+
1
T
j
∩A
j

· [v (S
∗
) −z
j
(T
j
∩ A
j
)] , if i ∈ T
j
∩ A
j
,
0, otherwise.
(11)
In case T
j
\S
∗
= ∅, we respectively deﬁne the outcomes (z
j
, R(T
j
)) and (x
∗j+1
, R(S
∗
)) by
z
i
j
=
_
_
_
1
T
j
\S
∗

· [v (T
j
) −x
∗j
(T
j
∩ A
j
)] , if i ∈ T
j
\S
∗
,
x
i
∗j
, if i ∈ T
j
∩ A
j
,
0, otherwise.
and by (11). Clearly, A
j+1
= T
j
∩A
j
is a nonempty proper subset of A
j
and (x
∗j
, R(S
∗
))
T
j
−→
(z
j
, R(T
j
))
S
∗
−→ (x
∗j+1
, R(S
∗
)).
Case II. T
j
∩ A
j
= ∅. In case T
j
\S
∗
= ∅, i.e., T
j
S
∗
, then y
∗
(T
j
) ≥ v (T
j
) by (10)
and hence we can ﬁnd an outcome (z
j
, R(T
j
)) satisfying y
i
∗
≥ z
i
j
for all i ∈ T
j
and
(x
∗j
, R(S
∗
))
T
j
−→ (z
j
, R(T
j
))
S
∗
−→ (y
∗
, R(S
∗
)) .
Since (N, v) is cohesive, v (N) > v (S
∗
) and v (N) > v (T
j
). In case T
j
\S
∗
= ∅, we
construct an o.i.dominating chain
(x
∗j
, R(S
∗
))
N
−→ (z
j
1
, {N})
T
j
−→ (z
j
1
, R(T
j
))
N
−→ (z
j
3
, {N})
S
∗
−→ (y
∗
, R(S
∗
))
by letting
z
i
j
1
=
_
x
i
∗j
+
v(N)−v(S
∗
)
A
j

, if i ∈ A
j
,
0, otherwise,
z
i
j
2
=
_
v(T
j
)
T
j
\S
∗

, if i ∈ T
j
\S
∗
,
0, otherwise,
and
z
i
j
3
=
_
v(N)
T
j
\S
∗

, if i ∈ T
j
\S
∗
,
0, otherwise.
Since A
0
 ≤ S
∗
 ≤ n − 1, there exists a positive integer r ≤ n − 2 such that A
r
= ∅
and T
r
∩A
r
= ∅. By Cases I, (x
∗r
, R(S
∗
)) can be reached from (x
∗
, R(S
∗
)) via a chain of
length at most 2 · (n −2). By Case II, (y
∗
, R(S
∗
)) can be reached from (x
∗r
, R(S
∗
)) via
a chain of length at most 4. Thus, we obtain the desired result.
13
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14