We investigate how rational individuals partition themselves into different coalitions in "hedonic games" [see Banerjee, Konishi and Sonmez (1998) and Bogomolnaia and Jackson (2000)], where individuals' preferences depend solely on the composition of the coalition they belong to. We show that...

If agents negotiate openly and form coalitions, can they reach efficient agreements? We address this issue within a class of coalition formation games with externalities where agents' preferences depend solely on the coalition structures they are associated with. We derive Ray and Vohra's (1997)...