Economists perceive moral hazard as an undesirable problem because it undermines efficiency. Carefully designed contracts can mitigate the moral hazard problem, but this assumes that a team is already formed. This paper demonstrates that these contracts are sometimes the reason why teams do not...

In this note we show that no solution to coalition formation games can satisfy a set of axioms that we propose as reasonable. Our result points out that "solutions" to the coalition formation cannot be interpreted as predictions of what would be ìresting pointsî for a game in the way stable...