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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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  1. 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.
  2. Barrett, Scott, 1994. "Self-Enforcing International Environmental Agreements," Oxford Economic Papers, Oxford University Press, vol. 46(0), pages 878-94, Supplemen.
  3. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
  4. Marion Kohler, 1999. "Coalition formation in international monetary policy games," Bank of England working papers 92, Bank of England.
  5. Carlo Carraro (ed.), 2003. "The Endogenous Formation of Economic Coalitions," Books, Edward Elgar Publishing, number 2999.
  6. 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.
  7. Hart, Sergiu & Kurz, Mordecai, 1983. "Endogenous Formation of Coalitions," Econometrica, Econometric Society, vol. 51(4), pages 1047-64, 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.
  9. Michael Hoel, 1992. "International environment conventions: The case of uniform reductions of emissions," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 2(2), pages 141-159, March.
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