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An Almost Ideal Sharing Scheme for Coalition Games with Externalities

Author

Listed:
  • Johan Eyckmans

    () (EHSAL - Europese hogeschool Brussel; K.U.Leuven-Center for Economic Studies)

  • Michael Finus

    () (Department of Economics, University of Hagen,)

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.

Suggested Citation

  • Johan Eyckmans & Michael Finus, 2004. "An Almost Ideal Sharing Scheme for Coalition Games with Externalities," Energy, Transport and Environment Working Papers Series ete0414, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
  • Handle: RePEc:ete:etewps:ete0414
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    References listed on IDEAS

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    16. Johan Eyckmans & Michael Finus, 2003. "Coalition Formation in a Global Warming Game: How the Design of Protocols Affects the Success of Environmental Treaty-Making," Energy, Transport and Environment Working Papers Series ete0317, KU Leuven, Department of Economics - Research Group Energy, Transport and Environment.
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    Cited by:

    1. Finus, Michael & McGinty, Matthew, 2015. "The Anti-Paradox of Cooperation: Diversity Pays!," Department of Economics Working Papers 46599, University of Bath, Department of Economics.
    2. Hans-Peter Weikard, 2009. "Cartel Stability Under An Optimal Sharing Rule," Manchester School, University of Manchester, vol. 77(5), pages 575-593, September.
    3. Carlo Carraro & Valentina Bosetti & Enrica De Cian & Romain Duval & Emanuele Massetti & Massimo Tavoni, 2009. "The incentives to participate in and the stability of international climate coalitions: a game theoretic approach using the WITCH Model," Working Papers 2009_28, Department of Economics, University of Venice "Ca' Foscari".
    4. Fuentes-Albero, Cristina & Rubio, Santiago J., 2010. "Can international environmental cooperation be bought?," European Journal of Operational Research, Elsevier, vol. 202(1), pages 255-264, April.
    5. Alejandro Caparrós & Michael Finus, 2016. "Public good agreements under the weakest-link technology," Working Papers 1602, Instituto de Políticas y Bienes Públicos (IPP), CSIC.
    6. Jonathan Colmer, 2011. "Asymmetry, optimal transfers and international environmental agreements," GRI Working Papers 66, Grantham Research Institute on Climate Change and the Environment.
    7. Henry, TULKENS & Parkash, CHANDER, 2006. "Cooperation, stability and self-enforcement in interational environmental agreements : a conceptual discussion," Discussion Papers (ECON - Département des Sciences Economiques) 2006003, Université catholique de Louvain, Département des Sciences Economiques, revised 15 Jan 2006.
    8. Finus, Michael & Pintassilgo, Pedro, 2013. "The role of uncertainty and learning for the success of international climate agreements," Journal of Public Economics, Elsevier, vol. 103(C), pages 29-43.
    9. Pedro Pintassilgo & Michael Finus & Marko Lindroos & Gordon Munro, 2010. "Stability and Success of Regional Fisheries Management Organizations," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 46(3), pages 377-402, July.
    10. Michael Finus & Pedro Pintassilgo, 2012. "International environmental agreements under uncertainty: does the 'veil of uncertainty' help?," Oxford Economic Papers, Oxford University Press, vol. 64(4), pages 736-764, October.
    11. Carlo Carraro & Johan Eyckmans & Michael Finus, 2006. "Optimal transfers and participation decisions in international environmental agreements," The Review of International Organizations, Springer, vol. 1(4), pages 379-396, December.
    12. BRECHET, Thierry & GERARD, François & TULKENS, Henry, 2007. "Climate coalitions: a theoretical and computational appraisal," CORE Discussion Papers 2007003, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    13. Kulmala, Soile & Levontin, Polina & Lindroos, Marko & Pintassilgo, Pedro, 2010. "Atlantic Salmon Fishery in the Baltic Sea – A Case of Trivial Cooperation," 2010 Conference (54th), February 10-12, 2010, Adelaide, Australia 59094, Australian Agricultural and Resource Economics Society.
    14. Carlo Carraro & Emanuele Massetti, 2010. "International Climate Change Negotiations: Lessons from Theory," Chapters,in: Climate Change Policies, chapter 8 Edward Elgar Publishing.
    15. Nagashima, Miyuki & Dellink, Rob & van Ierland, Ekko & Weikard, Hans-Peter, 2009. "Stability of international climate coalitions -- A comparison of transfer schemes," Ecological Economics, Elsevier, vol. 68(5), pages 1476-1487, March.
    16. 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.
    17. Jon Hovi & Hugh Ward & Frank Grundig, 2015. "Hope or Despair? Formal Models of Climate Cooperation," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 62(4), pages 665-688, December.
    18. Hans-Peter Weikard & Rob Dellink, 2014. "Sticks and carrots for the design of international climate agreements with renegotiations," Annals of Operations Research, Springer, vol. 220(1), pages 49-68, September.
    19. Porchiung Chou & Cheickna Sylla, 2008. "The formation of an international environmental agreement as a two-stage exclusive cartel formation game with transferable utilities," International Environmental Agreements: Politics, Law and Economics, Springer, vol. 8(4), pages 317-341, December.
    20. Calvo, Emilio & Rubio, Santiago J., 2013. "Dynamic Models of International Environmental Agreements: A Differential Game Approach," International Review of Environmental and Resource Economics, now publishers, vol. 6(4), pages 289-339, April.
    21. Emmi Nieminen & Lone Grønbæk Kronbak & Marko Lindroos, 2016. "International Agreements in the Multispecies Baltic Sea Fisheries," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 65(1), pages 109-134, September.
    22. Valentina Bosetti & Carlo Carraro & Enrica De Cian & Romain Duval & Emanuele Massetti & Massimo Tavoni, 2009. "The Incentives to Participate in, and the Stability of, International Climate Coalitions: A Game-theoretic Analysis Using the Witch Model," Working Papers 2009.64, Fondazione Eni Enrico Mattei.
    23. Dritan Osmani, "undated". "A note on optimal transfer schemes, stable coalition for environmental protection and joint maximization assumption," Working Papers FNU-176, Research unit Sustainability and Global Change, Hamburg University.
    24. Urs Steiner Brandt & Lone Grønbæk Kronbak, 2006. "Robustness of Sharing Rules under Climate Change - The Case of International Fisheries Agreements," Working Papers 73/06, University of Southern Denmark, Department of Sociology, Environmental and Business Economics.

    More about this item

    Keywords

    coalition games; partition function; externalities; sharing schemes;

    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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