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The Core of an Economy with Multilateral Environmental Externalities


  • Henry Tulkens

    (CORE, UniversitÊ Catholique de Louvain, 34 Voie du Roman Pays, B-1348 Louvain-la-Neuve, Belgium)

  • Parkash Chander

    (Indian Statistical Institute and California Institute of Technology, Sansanwal 7, New Delhi 110016, India)


When environmental externalities are international - i.e. transfrontier - they most often are multilateral and embody public good characteristics. Improving upon inefficient laissez-faire equilibria requires voluntary cooperation for which the game-theoretic core concept provides optimal outcomes that have interesting properties against free riding. To define the core, however, the characteristic function of the game associated with the economy (which specifies the payoff achievable by each possible coalition of players - here, the countries) must also reflect in each case the behavior of the players which are not members of the coalition. This has been for a long time a disputed issue in the theory of the core of economies with externalities. Among the several assumptions that can be made as to this behaviour, a plausible one is defined in this paper, for which it is shown that the core of the game is nonempty. The proof is constructive in the sense that it exhibits a strategy (specifying an explicit coordinated abatement policy and including financial transfers) that has the desired property of nondomination by any proper coalition of countries, given the assumed behavior of the other countries. This strategy is also shown to have an equilibrium interpretation in the economic model.

Suggested Citation

  • Henry Tulkens & Parkash Chander, 1997. "The Core of an Economy with Multilateral Environmental Externalities," International Journal of Game Theory, Springer;Game Theory Society, vol. 26(3), pages 379-401.
  • Handle: RePEc:spr:jogath:v:26:y:1997:i:3:p:379-401 Note: Received September 1995 Revised version September 1996

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    References listed on IDEAS

    1. Herrera, Helios & Martinelli, Cesar, 2006. "Group formation and voter participation," Theoretical Economics, Econometric Society, vol. 1(4), pages 461-487, December.
    2. Gerling, Kerstin & Gruner, Hans Peter & Kiel, Alexandra & Schulte, Elisabeth, 2005. "Information acquisition and decision making in committees: A survey," European Journal of Political Economy, Elsevier, vol. 21(3), pages 563-597, September.
    3. Krasa, Stefan & Polborn, Mattias K., 2009. "Is mandatory voting better than voluntary voting?," Games and Economic Behavior, Elsevier, vol. 66(1), pages 275-291, May.
    4. Nicola Persico, 2004. "Committee Design with Endogenous Information," Review of Economic Studies, Oxford University Press, vol. 71(1), pages 165-191.
    5. repec:cup:apsrev:v:79:y:1985:i:01:p:62-78_22 is not listed on IDEAS
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    More about this item

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • Q25 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Water


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