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A Micro Foundation of Core Stability in Positive-Externality Coalition Games

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  • Michael Finus
  • Bianca Rundshagen

Abstract

We argue that the new approach for studying coalitions has some advantages over the classical approach: it is better at capturing externalities between coalitions and provides a micro foundation of the coalition formation process that can be related to the design of an agreement. However, we also recognize that the core is an appealing concept of the classical approach. Therefore, we develop a H-game in the spirit of the Delta- and Gamma-games of Hart and Kurz [1983], and show that strong Nash-equilibrium coalition structures in this game are identical to alpha- and beta-core-stable coalition structures for economic problems with positive externalities.

Suggested Citation

  • Michael Finus & Bianca Rundshagen, 2006. "A Micro Foundation of Core Stability in Positive-Externality Coalition Games," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 162(2), pages 329-346, June.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200606)162:2_329:amfocs_2.0.tx_2-p
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    References listed on IDEAS

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    1. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-894, Supplemen.
    2. Carlo Carraro (ed.), 2003. "The Endogenous Formation of Economic Coalitions," Books, Edward Elgar Publishing, number 2999.
    3. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August.
    4. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
    5. Claude d'Aspremont & Alexis Jacquemin & Jean Jaskold Gabszewicz & John A. Weymark, 1983. "On the Stability of Collusive Price Leadership," Canadian Journal of Economics, Canadian Economics Association, vol. 16(1), pages 17-25, February.
    6. Kohler, Marion, 2002. "Coalition formation in international monetary policy games," Journal of International Economics, Elsevier, vol. 56(2), pages 371-385, March.
    7. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-1064, July.
    8. Michael Finus & Bianca Rundshagen, 2003. "Endogenous coalition formation in global pollution control: a partition function approach," Chapters,in: The Endogenous Formation of Economic Coalitions, chapter 6 Edward Elgar Publishing.
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    Cited by:

    1. Johan Eyckmans & Michael Finus, 2007. "Measures to enhance the success of global climate treaties," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 7(1), pages 73-97, March.
    2. Michael Finus & Bianca Rundshagen & Johan Eyckmans, 2014. "Simulating a sequential coalition formation process for the climate change problem: first come, but second served?," Annals of Operations Research, Springer, vol. 220(1), pages 5-23, September.
    3. Wolfgang Buchholz & Alexander Haupt & Wolfgang Peters, 2016. "Equity as a Prerequisite for Stability of Cooperation on Global Public Good Provision," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 61-78, September.
    4. Finus, Michael & McGinty, Matthew, 2015. "The Anti-Paradox of Cooperation: Diversity Pays!," Department of Economics Working Papers 46599, University of Bath, Department of Economics.

    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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