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Stable agreements through liability rules: a multi- choice games approach to the social cost problem

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  • Kevin Techer

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We consider a class of social cost problems where one polluter interacts with an arbitrary number of potential victims. Agents are supposed to cooperate and negotiate an optimal pollution level together with monetary transfers. We examine multi-choice cooperative games associated with a social cost problem and an assignment (or mapping) of rights. We introduce a class of mappings of rights that takes into account the pollution intensity and we consider three properties on mappings of rights: core compatibility, Kaldor-Hicks core compatibility and no veto power for a victim. We demonstrate that there exist only two families of mappings of rights that satisfy core compatibility. However, no mapping of rights satisfies Kaldor-Hicks core compatibility and no veto power for a victim.

Suggested Citation

  • Kevin Techer, 2020. "Stable agreements through liability rules: a multi- choice games approach to the social cost problem," Working Papers halshs-02939246, HAL.
    • Handle: RePEc:hal:wpaper:halshs-02939246
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-02939246
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    Keywords

    Externality; Liability rules; Multi-choice cooperative game; Core;
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