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An Almost Ideal Sharing Scheme for Coalition Games with Externalities

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  • Johan Eyckmans
  • M Finus

Abstract

We propose a class of sharing schemes for the distribution of the gains from cooperation for coalition games with externalities. In the context of the partition function, it is shown that any member of this class of sharing schemes leads to the same set of stable coalitions in the sense of d’Aspremont et al. (1983). These schemes are “almost ideal” in that they stabilize these coalitions which generate the highest global welfare among the set of “potentially stable coalitions”. Our sharing scheme is particularly powerful for economic problems that are characterized by positive externalities from coalition formation and which therefore are likely to suffer from severe free-riding.
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Suggested Citation

  • Johan Eyckmans & M Finus, 2004. "An Almost Ideal Sharing Scheme for Coalition Games with Externalities," Working Papers of Department of Economics, Leuven 544086, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
    • Handle: RePEc:ete:ceswps:544086
    Note: paper number ETE WP 2004-14
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    File URL: https://lirias.kuleuven.be/retrieve/c371d0f4-5651-4c9f-9833-3056afec8370
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    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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