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Cartel Stability Under An Optimal Sharing Rule

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  • HANS-PETER WEIKARD

Abstract

In this paper I analyse the stability of cartels in games with heterogeneous players and externalities. I introduce a class of sharing rules for coalition pay-offs, called 'optimal sharing rules', that stabilize all cartels that are possibly stable under some arbitrary sharing rule. To illustrate the impact of optimal sharing with heterogeneous players and positive externalities I analyse a public goods game. In contrast to games with identical players that are common in the study of international environmental agreements, my results show that large coalitions may well be stable when optimal sharing is applied. Copyright © 2009 The Author. Journal compilation © 2009 Blackwell Publishing Ltd and The University of Manchester.

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  • Hans-Peter Weikard, 2009. "Cartel Stability Under An Optimal Sharing Rule," Manchester School, University of Manchester, vol. 77(5), pages 575-593, September.
  • Handle: RePEc:bla:manchs:v:77:y:2009:i:5:p:575-593
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    References listed on IDEAS

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    1. Sylvie Thoron, 1998. "Formation of a Coalition-Proof Stable Cartel," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 63-76, February.
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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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