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Cooperation with Externalities and Uncertainty

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  • Habis , Helga

    () (Department of Economics, Lund University)

  • Csercsik, Dávid

    () (Institute of Economics, Research Centre for Economic and Regional Studies, Hungarian Academy)

Abstract

We introduce a new class of cooperative games where the worth of a coalition depends on the behavior of other players and on the state of nature as well. We allow for coalitions to form both before and after the resolution of uncertainty, hence agreements must be stable against both types of deviations. The appropriate extension of the classical core concept, the Sustainable Core, is defined for this new setup to test the stability of allocations in such a complex environment. A prominent application, a game of consumers and generators on an electrical energy transmission network is examined in details, where the power in- and outlets of the nodes have to be determined in a way, that if any line instantaneously fails, none of the remaining lines may be overloaded. We show that fulfilling this safety requirement in a mutually acceptable way can be achieved by choosing an element in the Sustainable Core.

Suggested Citation

  • Habis , Helga & Csercsik, Dávid, 2012. "Cooperation with Externalities and Uncertainty," Working Papers 2012:27, Lund University, Department of Economics.
  • Handle: RePEc:hhs:lunewp:2012_027
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    File URL: http://project.nek.lu.se/publications/workpap/papers/WP12_27.pdf
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    References listed on IDEAS

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    1. repec:kap:netspa:v:17:y:2017:i:4:d:10.1007_s11067-017-9363-0 is not listed on IDEAS
    2. Jan Abrell & Friedrich Kunz, 2015. "Integrating Intermittent Renewable Wind Generation - A Stochastic Multi-Market Electricity Model for the European Electricity Market," Networks and Spatial Economics, Springer, vol. 15(1), pages 117-147, March.

    More about this item

    Keywords

    partition function form games; uncertainty; core; sustainability;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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