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Externalities and compensation: primeval games and solutions

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Author Info
Ju, Yuan
Borm, Peter (Tilburg University, Center for Economic Research)

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Abstract

The classical literature (Pigou (1920), Coase (1960), Arrow (1970)) and the relatively recent studies (cf. Varian (1994)) associate the externality problem with efficiency. This paper focuses explicitly on the compensation problem in the context of externalities. To capture the features of inter-individual externalities, this paper constructs a new game-theoretic framework: primeval games. These games are used to design normative compensation rules for the underlying compensation problems: the marginalistic rule, the concession rule, and the primeval rule. Characterizations of the marginalistic rule and the concession rule are provided and specific properties of the primeval rule are studied.

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Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 71.

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Date of creation: 2005
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Handle: RePEc:dgr:kubcen:200571

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Find related papers by JEL classification:
C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
D62 - Microeconomics - - Welfare Economics - - - Externalities
D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Borm, P.E.M. & Ju, Y. & Ruys, P.H.M., 2004. "Compensating losses and sharing surpluses in project-allocation situations," Discussion Paper 6, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Inés Macho-Stadler & David Pérez-Castrillo & David Wettstein, 2004. "Sharing the surplus: A just and efficient proposal for environments with externalities," UFAE and IAE Working Papers 611.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
  3. Ju, Y. & Borm, P.E.M. & Ruys, P.H.M., 2004. "The consensus value : a new solution concept for cooperative games," Discussion Paper 50, Tilburg University, Center for Economic Research. [Downloadable!]
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  4. Bolger, E M, 1989. "A Set of Axioms for a Value for Partition Function Games," International Journal of Game Theory, Springer, vol. 18(1), pages 37-44.
  5. Ju, Y., 2004. "The consensus value for games in partition function form," Discussion Paper 60, Tilburg University, Center for Economic Research. [Downloadable!]
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  6. Hal R. Varian, 1994. "A Solution to the Problem of Externalities when Agents are Well-Informed}," Microeconomics 9401003, EconWPA. [Downloadable!]
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  7. Pham Do, K.H. & Norde, H., 2002. "The Shapley value for partition function form games," Discussion Paper 4, Tilburg University, Center for Economic Research. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ju, Yuan & Borm, Peter, 2006. "A non-cooperative approach to the compensation rules for primeval games," Discussion Paper 97, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Yuan Ju & David Wettstein, 2006. "Implementing Cooperative Solution Concepts: a Generalized Bidding Approach," Keele Economics Research Papers KERP 2006/06, Centre for Economic Research, Keele University. [Downloadable!]
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  3. Yuan Ju & Peter Borm & Pieter Ruys, 2007. "The consensus value: a new solution concept for cooperative games," Social Choice and Welfare, Springer, vol. 28(4), pages 685-703, June. [Downloadable!] (restricted)
    Other versions:
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