Discussion Paper Details

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Title: The Role of Market Size in the Formation of Jurisdictions

Author(s): Alessandra Casella

Publication Date: June 1996

Keyword(s): Coalition Formation, Economic Integration, Market Size and Strong Nash Equilibrium

Programme Area(s): International Macroeconomics

Abstract: Administrative and political reorganization is being actively debated even in the mature, stable economies of Western Europe. This paper investigates the possibility of such reorganization being tied to the integration of economic markets. The paper describes the equilibrium of a game where heterogeneous individuals form coalitions for the provision of a public good, and where the number and composition of these coalitions depend on the overall size of the market. Changes in the extent of the market put pressure on existing jurisdictions because they change both the desired public goods and, more importantly, the trade-offs that determine the borders of the jurisdictions. Thus individuals will want to renegotiate the agreements that support the existing jurisdictions and form alternative coalitions.

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Bibliographic Reference

Casella, A. 1996. 'The Role of Market Size in the Formation of Jurisdictions'. London, Centre for Economic Policy Research.