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Equity as a Prerequisite for Stable Cooperation in a Public-Good Economy - The Core Revisited

Author

Listed:
  • Wolfgang Buchholz
  • Wolfgang Peters

Abstract

In this paper we explore the relationship between an equitable distribution of the cost shares in public-good provision on the one hand and the core property of an allocation on the other. In particular we show that it is an inhomogeneous distribution of cost shares that motivates some coalition of agents to separate and to block an initially given Pareto optimal allocation which can be interpreted as the outcome of a negotiation process when all agents form a grand coalition. Distributional equity of the individual burdens of public-good contribution is assessed by a specific sacrifice measure (the “Moulin sacrifice”) which is derived from the egalitarian-equivalent concept suggested by Moulin (1987). We also develop a simple core test by which it can be checked whether a given allocation is in the core thus being a possible outcome of a cooperative agreement in the public-good economy.

Suggested Citation

  • Wolfgang Buchholz & Wolfgang Peters, 2010. "Equity as a Prerequisite for Stable Cooperation in a Public-Good Economy - The Core Revisited," CESifo Working Paper Series 3113, CESifo.
    • Handle: RePEc:ces:ceswps:_3113
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    File URL: https://www.cesifo.org/DocDL/cesifo1_wp3113.pdf
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    References listed on IDEAS

    as
    1. Moulin, Herve, 1987. "Egalitarian-Equivalent Cost Sharing of a Public Good," Econometrica, Econometric Society, vol. 55(4), pages 963-976, July.
    2. Mas-Colell, Andreu & Silvestre, Joaquim, 1989. "Cost share equilibria: A Lindahlian approach," Journal of Economic Theory, Elsevier, vol. 47(2), pages 239-256, April.
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    Cited by:

    1. Yu-Fu Chen & Michael Funke, 2010. "Global Warming And Extreme Events: Rethinking The Timing And Intensity Of Environmental Policy," Dundee Discussion Papers in Economics 236, Economic Studies, University of Dundee.
    2. L.F.M. Groot & J. Swart, 2015. "From Nash to Lindahl in Climate Change Policy," Working Papers 15-01, Utrecht School of Economics.

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    More about this item

    Keywords

    public goods; core; equity; stability of cooperation;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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