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A New Class of Welfare Maximizing Stable Sharing Rules for Partition Function Games with Externalities

Author

Listed:
  • Johan Eyckmans

    (Hogeschool-Universiteit Brussel)

  • Michael Finus

    (University of Bath)

  • Lina Mallozziy

    (Università di Napoli Federico II)

Abstract

We propose a class of sharing rules for the distribution of the gains from cooperation for partition function games with externalities. We show that this class of sharing rules is characterized by three axioms: coalitional efficiency, additivity and anonimity which are adapted to the context of partition function games. The sharing rules stabilize, in the sense of d'Aspremont et al. (1983), the coalition which generates the highest global welfare among the set of potentially internally stable coalitions. The new class of sharing rules is particularly powerful for economic problems that are characterized by positive externalities from coalition formation (outsiders benefit from the expansion of the coalition) and which therefore often suffer from free-riding.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Johan Eyckmans & Michael Finus & Lina Mallozziy, 2012. "A New Class of Welfare Maximizing Stable Sharing Rules for Partition Function Games with Externalities," Department of Economics Working Papers 6/12, University of Bath, Department of Economics.
    • Handle: RePEc:eid:wpaper:32513
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    References listed on IDEAS

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    Cited by:

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    2. Michael Finus & Matthew McGinty, 2015. "The Anti-Paradox of Cooperation: Diversity Pays!," Department of Economics Working Papers 40/15, University of Bath, Department of Economics.
    3. Alejandro Caparrós & Michael Finus, 2020. "Public good agreements under the weakest‐link technology," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 22(3), pages 555-582, June.
    4. Lessmann, Kai & Kornek, Ulrike & Dellink, Rob & Emmerling, Johannes & Eyckmans, Johan & Nagashima, Miyuki & Weikard, Hans-Peter & Yang, Zili, 2014. "The Stability and Effectiveness of Climate Coalitions: A Comparative Analysis of Multiple Integrated Assessment Models," Climate Change and Sustainable Development 163598, Fondazione Eni Enrico Mattei (FEEM).
    5. Alejandro Caparrós & Michael Finus, 2020. "The Corona-Pandemic: A Game-Theoretic Perspective on Regional and Global Governance," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 76(4), pages 913-927, August.
    6. Tulkens, Henry, 2014. "Internal vs. core coalitional stability in the environmental externality game: A reconciliation," LIDAM Discussion Papers CORE 2014058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Achim Hagen & Pierre von Mouche & Hans-Peter Weikard, 2020. "The Two-Stage Game Approach to Coalition Formation: Where We Stand and Ways to Go," Games, MDPI, vol. 11(1), pages 1-31, January.

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    More about this item

    Keywords

    resources; economic growth; renewable energy; natural; environmental policy;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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