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An Almost Ideal Sharing Scheme for Coalition Games with Externalities

  • Johan Eyckmans

    ()

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

  • Michael Finus

    ()

    (Department of Economics, University of Hagen,)

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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Paper provided by KU Leuven, Department of Economics - Research Group Energy, Transport and Environment in its series Energy, Transport and Environment Working Papers Series with number ete0414.

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Length: 16 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:ete:etewps:ete0414
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  13. Hans-Peter Weikard & Juan-Carlos Altamirano-Cabrera & Michael Finus, 2004. "The Impact of Surplus Sharing on The Stability of International Climate Agreements," Working Papers 2004.99, Fondazione Eni Enrico Mattei.
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