Network game approach on negotiation process for the case of the Caspian oil allocation

A methodology is shown to analyze phases of player´s coalition formation. It can be applied to inter-regional cooperation analysis which is a relevant problem in Japan. Network formation game is used to model the problem with some extensions on a concept of coalition and coalition formative condition. A coalition among more than 3 players is introduced, which is not considered in standard network formation game. A coalition formative condition is also introduced taking into account specific characteristics about infrastructure construction. The methodology is applied to oil allocation problem among Caspian coastal countries, and how the methodology works in the real problem is examined. As a result, it is revealed that considering the coalition among more than 3 players is not sure to produce more social surplus than considering only the coalition between 2 players.