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A Coase Theorem Based on a New Concept of the Core

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  • Zheng, Charles Zhoucheng

Abstract

The core is reformulated to incorporate the externality typical in strategic form games. Any coalition of players may deviate by trying to commit to a profile of actions different from a status quo. The outsiders of the coalition may take a coordinated measure, incentive-feasibly for themselves, to preempt the coalition's commitment. If a coalition succeeds in committing to its action profile, the outsiders' reactions constitute a core solution among themselves. A core solution is robust against the deviations of coalitions which expect such preemptive and reactive responses from the other players. In an externality problem where pollution is the dominant action, the core is nonempty. In any two-player strategic form game, the core is also nonempty.

Suggested Citation

  • Zheng, Charles Zhoucheng, 2009. "A Coase Theorem Based on a New Concept of the Core," Staff General Research Papers Archive 13051, Iowa State University, Department of Economics.
  • Handle: RePEc:isu:genres:13051
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    File URL: http://www2.econ.iastate.edu/papers/p1449-2009-03-26.pdf
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    References listed on IDEAS

    as
    1. Xiong, Siyang & Zheng, Charles Zhoucheng, 2007. "Core equivalence theorem with production," Journal of Economic Theory, Elsevier, vol. 137(1), pages 246-270, November.
    2. Gerard Debreu, 1963. "On a Theorem of Scarf," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 30(3), pages 177-180.
    3. Jordan, J.S., 2006. "Pillage and property," Journal of Economic Theory, Elsevier, vol. 131(1), pages 26-44, November.
    4. Charles Zhoucheng Zheng, 2002. "Optimal Auction with Resale," Econometrica, Econometric Society, vol. 70(6), pages 2197-2224, November.
    5. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999.
    6. Anderson, Robert M, 1978. "An Elementary Core Equivalence Theorem," Econometrica, Econometric Society, vol. 46(6), pages 1483-1487, November.
    7. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    Cited by:

    1. Chen-Ying Huang & Tomas Sjöström, 2010. "The Recursive Core for Non-Superadditive Games," Games, MDPI, vol. 1(2), pages 1-23, April.

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    More about this item

    Keywords

    core; equilibrium; cooperative game theory; coalition; externality; competing principals; Coase Theorem;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General

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