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

Author

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  • Eyckmans, Johan
  • Finus, Michael
  • Mallozziy, Lina

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.
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Suggested Citation

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

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    Citations

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    Cited by:

    1. Kai Lessmann & Ulrike Kornek & Valentina Bosetti & Rob Dellink & Johannes Emmerling & Johan Eyckmans & Miyuki Nagashima & Hans-Peter Weikard & Zili Yang, 2014. "The Stability and Effectiveness of Climate Coalitions: A Comparative Analysis of Multiple Integrated Assessment Models," Working Papers 2014.05, Fondazione Eni Enrico Mattei.
    2. Caparros, Alejandro & Finus, Michael, 2016. "Public Good Agreements under the Weakest-link Technology," Department of Economics Working Papers 58129, University of Bath, Department of Economics.
    3. Finus, Michael & McGinty, Matthew, 2015. "The Anti-Paradox of Cooperation: Diversity Pays!," Department of Economics Working Papers 46599, University of Bath, Department of Economics.
    4. Alejandro Caparrós & Michael Finus, 2016. "Public good agreements under the weakest-link technology," Working Papers 1602, Instituto de Políticas y Bienes Públicos (IPP), CSIC.
    5. Tulkens, Henry, 2014. "Internal vs. core coalitional stability in the environmental externality game: A reconciliation," CORE Discussion Papers 2014058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).

    More about this item

    Keywords

    resources; economic growth; renewable energy; natural; environmental policy;

    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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