Deviations, uncertainty and the core

- This paper studies coalition formation under uncertainty.
- The paper proposes the interim sequential core (ISC) as a solution concept.
- The solution remedies a problem with the weak sequential core (WSC) of Habis and Herings (2011).

The study of coalition formation under uncertainty poses subtle questions regarding the appropriate definition of the core. In this paper a new core concept, the interim sequential core (ISC), is proposed as a solution concept to transferable utility games with uncertainty when binding agreements cannot be written. This solution concept remedies a problem with the weak sequential core (WSC) of Habis and Herings (2011) but avoids the myopia implicit in the strong sequential core (SSC). The three core notions are shown to be related by the subset inclusion ordering. The solution concept is demonstrated by analyzing the production economies of Shapley and Shubik (1967).