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

  • Michael Finus
  • Bianca Rundshagen

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.

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Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 162 (2006)
Issue (Month): 2 (June)
Pages: 329-346

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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200606)162:2_329:amfocs_2.0.tx_2-p
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