Cooperation with Externalities and Uncertainty
AbstractWe introduce a new class of cooperative games where the worth of a coalition depends on the behavior of other players and on the state of nature as well. We allow for coalitions to form both before and after the resolution of uncertainty, hence agreements must be stable against both types of deviations. The appropriate extension of the classical core concept, the Sustainable Core, is defined for this new setup to test the stability of allocations in such a complex environment. A prominent application, a game of consumers and generators on an electrical energy transmission network is examined in details, where the power in- and outlets of the nodes have to be determined in a way, that if any line instantaneously fails, none of the remaining lines may be overloaded. We show that fulfilling this safety requirement in a mutually acceptable way can be achieved by choosing an element in the Sustainable Core.
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Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2012:27.
Length: 20 pages
Date of creation: 08 Oct 2012
Date of revision:
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Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund,Sweden
Phone: +46 +46 222 0000
Fax: +46 +46 2224613
Web page: http://www.nek.lu.se/en
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partition function form games; uncertainty; core; sustainability;
Other versions of this item:
- C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
- L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-11-11 (All new papers)
- NEP-ENE-2012-11-11 (Energy Economics)
- NEP-GTH-2012-11-11 (Game Theory)
- NEP-MIC-2012-11-11 (Microeconomics)
- NEP-NET-2012-11-11 (Network Economics)
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