Stabilizing Welfare-Maximizing Decisions via Endogenous Transfers

Abstract

Many multiagent systems depend on collective decisions made by self-interested agents, which raises deep questions about coalition formation and stability. We study social choice with endogenous, outcome-contingent transfers, where agents voluntarily form contracts that redistribute utility depending on the collective decision, allowing for fully strategic coalition formation. We show that under consensus rules, individually rational strong Nash equilibria (IR–SNE) always exist, implementing welfare-maximizing outcomes with feasible transfers, and provide a simple, efficient algorithm to construct them. For more general anonymous, monotonic, and resolute rules, we identify necessary conditions for viable deviations, significantly limiting the possibility of destabilizing coalitions. By bridging cooperative and noncooperative perspectives, our approach shows that transferable utility can achieve core-like stability, restoring efficiency and budget balance even where classical impossibility results generally apply. Overall, this framework offers a practical and robust way to coordinate large-scale strategic multiagent systems.