In many situations, local jurisdictions are willing to form coalition or groups with others to share the cost of local public goods rather than solely to manage their own. In this article, the issue of stability of endogenously formed coalitions in games with positive spillover is investigated. It is shown that the standard concept of Nash equilibria fails to single out the unique equilibrium coalition and needs further refinement of the stability conditions. Coalition-proof Nash stability is proven to be more powerful in selecting stable coalitions by illustrating a numerical example.
