Stable Coalition Structures with Fixed Decision Scheme

Abstract

This paper studies the stability of a finite local public goods economy in horizontal differentiation, where a jurisdiction's choice of the public good is given by an exogenous decision scheme. In this paper, we characterize the class of decision schemes that ensure the existence of an equilibrium with free mobility (that we call Tiebout equilibrium) for monotone distribution of players. This class contains all the decision schemes that lie between the Rawlsian decision scheme and the median voter with mid-distance of the two median voters when there are ties. In the last part of the paper, we prove the non-emptiness of the core of this coalition formation game.