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An Almost Ideal Sharing Scheme for Coalition Games with Externalities

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Author Info
Eyckmans, Johan
Finus, Michael

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Abstract

Cooperative agreements among firms to coordinate R&D investments and share knowledge or coordination among nations to reduce trade barriers or to provide global public goods usually proves difficult due to free-rider incentives. In this paper, we propose a sharing scheme for the distribution of the gains from cooperation for games with externalities and heterogeneous players in order to mitigate free-rider problems. We show that every sharing rule belonging to our scheme leads to the same set of stable coalitions which is never empty. This scheme is "almost ideal" because it stabilizes those coalitions generating the highest possible global worth among the set of all "potentially stable coalitions". Our Almost Ideal Sharing Scheme is particularly powerful for economic problems where outsiders benefit from the coalition's actions (positive externalities) and which therefore are likely to suffer from severe free-riding.

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File URL: http://hdl.handle.net/1893/1078
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Paper provided by University of Stirling, Department of Economics in its series Stirling Economics Discussion Papers with number 2009-10.

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Date of creation: Apr 2009
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Handle: RePEc:stl:stledp:2009-10

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Postal: Department of Economics, Stirling, Stirling, Scotland FK9 4LA
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Related research
Keywords: sharing schemes; externalities; partition function; coalition games;

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  1. Johan Eyckmans & Michael Finus, 2003. "Coalition Formation in a Global Warming Game: How the Design of Protocols Affects the Success of Environmental Treaty-Making," Energy, Transport and Environment Working Papers Series ete0317, Katholieke Universiteit Leuven, Centrum voor Economische Studiën, Energy, Transport and Environment. [Downloadable!]
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  2. Ray, D. & Vohra, R., 1996. "A Theory of Endogenous Coalition Structure," Papers 68, Boston University - Industry Studies Programme.
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  3. Arce M., Daniel G. & Sandler, Todd, 2003. "Health-promoting alliances," European Journal of Political Economy, Elsevier, vol. 19(2), pages 355-375, June. [Downloadable!] (restricted)
  4. Sandler, Todd & Enders, Walter, 2004. "An economic perspective on transnational terrorism," European Journal of Political Economy, Elsevier, vol. 20(2), pages 301-316, June. [Downloadable!] (restricted)
  5. Chander, Parkash & Tulkens, Henry, 1994. "The Core of an Economy With Multilateral Environmental Externalities," Working Papers 886, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
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  6. Thomson, William, 1994. "Cooperative models of bargaining," Handbook of Game Theory with Economic Applications, in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 2, chapter 35, pages 1237-1284 Elsevier. [Downloadable!] (restricted)
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  7. Marion Kohler, . "Coalition formation in international monetary policy games," Bank of England working papers 92, Bank of England. [Downloadable!]
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  8. Francesco Bosello & Barbara Buchner & Carlo Carraro, 2003. "Equity, Development, and Climate Change Control," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 601-611, 04/05. [Downloadable!] (restricted)
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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. Carlo Carraro & Johan Eyckmans & Michael Finus, 2006. "Optimal Transfers and Participation Decisions in International Environmental Agreements," Working Papers 2006_44, University of Venice "Ca' Foscari", Department of Economics. [Downloadable!]
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  2. Thierry, BRECHET & Franois, GERARD & Henry, TULKENS, 2007. "Climate coalitions : a theoretical and computational appraisal," Discussion Papers (ECON - Département des Sciences Economiques) 2007006, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
    Other versions:
  3. Michael Finus & Pedro Pintassilgo & Marko Lindroos & Gordon Munro, 2008. "Stability and Success of Regional Fisheries Management Organizations," Working Papers 2008.20, Fondazione Eni Enrico Mattei. [Downloadable!]
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  4. Porchiung Chou & Cheickna Sylla, 2008. "The formation of an international environmental agreement as a two-stage exclusive cartel formation game with transferable utilities," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 8(4), pages 317-341, December. [Downloadable!] (restricted)
  5. Urs Steiner Brandt & Lone Grønbæk Kronbak, 2006. "Robustness of Sharing Rules under Climate Change - The Case of International Fisheries Agreements," Working Papers 73/06, University of Southern Denmark, Department of Environmental and Business Economics. [Downloadable!]
  6. Thierry Bréchet & François Gerard, 2007. "Climate Coalitions: A Theoretical and Computational Appraisal," Working Papers 2007.21, Fondazione Eni Enrico Mattei. [Downloadable!]
  7. Hans-Peter Weikard & Rob Dellink, 2008. "Sticks and Carrots for the Design of International Climate Agreements with Renegotiations," Working Papers 2008.26, Fondazione Eni Enrico Mattei. [Downloadable!]
  8. Valentina Bosetti & Carlo Carraro & Enrica De Cian & Romain Duval & Emanuele Massetti & Massimo Tavoni, 2009. "The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model," Working Papers 2009.64, Fondazione Eni Enrico Mattei. [Downloadable!]
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