Constitutions and Groups

Mauleon, Ana [USL-B] Röhl, Nils [USL-B] Vannetelbosch, Vincent [UCL]

We develop a theoretical framework that allows us to study the group structures that are going to emerge at equilibrium when individuals are allowed to engage in several groups at the same time. Each group is supposed to have specific rules or constitutions governing both the composition of the group (restricting the set of feasible deviating coalitions) as well as the exit of already existing members and/or the arrival of new members (i.e., the supporting coalitions that could grant the admission into the group of each feasible deviating coalition). Given these constitutions, we study the existence of constitutionally stable group structures. Constitutional stability imposes that any feasible change made to the group structure needs the consent of both the deviating players and every member of at least one supporting coalition. We show that the society induces a constitutionally stable group structure if and only if the constitutions allow for a common ranking. We provide requirements on constitutions and individuals' preferences under which stable group structures are induced for sure. Furthermore, by embedding many-to-many matchings into our setting, we apply our model to job markets with labor unions. We find a variation of Roth's "polarization of interests" (cf. Roth, 1984) between employers and employees: Each side of the market would be worse off if the other side obtains more degree of authority.