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Externalities and Compensation:Primeval Games and Solutions

  • Yuan Ju

    ()

    (Department of Economics, Keele,)

  • Peter Borm

    (CentER for Economic Research and Department of Econometrics and Operations Research, Tilburg University,)

The classical literature (Pigou (1920), Coase (1960), Arrow (1970)) and the relatively recent studies (cf. Varian (1994)) associate the externality problem with efficiency. This paper focuses explicitly on the compensation problem in the context of externalities. To capture the features of inter-individual externalities, this paper constructs a new game-theoretic framework: primeval games. These games are used to design normative compensation rules for the underlying compensation problems: the marginalistic rule, the concession rule, and the primeval rule. Characterizations of the marginalistic rule and the concession rule are provided and specific properties of the primeval rule are studied.

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File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0505.pdf
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Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2005/05.

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Length: 37 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:kee:kerpuk:2005/05
Contact details of provider: Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
Phone: +44 (0)1782 584581
Fax: +44 (0)1782 717577
Web page: http://www.keele.ac.uk/depts/ec/cer/
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Order Information: Postal: Centre for Economic Research, Research Institute for Public Policy and Management, Keele University, Staffordshire ST5 5BG - United Kingdom
Web: http://www.keele.ac.uk/depts/ec/cer/pubs_kerps.htm Email:


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  1. Pham Do, K.H. & Norde, H.W., 2002. "The Shapley Value for Partition Function Form Games," Discussion Paper 2002-4, Tilburg University, Center for Economic Research.
  2. Hal R. Varian, 1994. "A Solution to the Problem of Externalities when Agents are Well-Informed}," Microeconomics 9401003, EconWPA.
  3. Ju, Y. & Borm, P.E.M. & Ruys, P.H.M., 2004. "The Consensus Value : A New Solution Concept for Cooperative Games," Discussion Paper 2004-50, Tilburg University, Center for Economic Research.
  4. repec:dgr:kubcen:200642 is not listed on IDEAS
  5. Inés Macho-Stadler & David Pérez-Castrillo & David Wettstein, 2004. "Sharing the surplus: A just and efficient proposal for environments with externalities," Working Papers 119, Barcelona Graduate School of Economics.
  6. Ju, Y. & Borm, P.E.M., 2006. "A Non-cooperative Approach to the Compensation Rules for Primeval Games," Discussion Paper 2006-97, Tilburg University, Center for Economic Research.
  7. repec:dgr:kubcen:20024 is not listed on IDEAS
  8. Ju, Y. & Wettstein, D., 2006. "Implementing Cooperative Solution Concepts : A Generalized Bidding Approach," Discussion Paper 2006-42, Tilburg University, Center for Economic Research.
  9. repec:dgr:kubcen:200460 is not listed on IDEAS
  10. Ju, Y. & Borm, P.E.M. & Ruys, P.H.M., 2007. "The consensus value : A new solution concept for cooperative games," Other publications TiSEM 6cd44a12-a909-47f8-8d85-e, Tilburg University, School of Economics and Management.
  11. repec:ner:tilbur:urn:nbn:nl:ui:12-195202 is not listed on IDEAS
  12. Yuan Ju, 2007. "The Consensus Value For Games In Partition Function Form," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 437-452.
  13. repec:dgr:kubcen:200450 is not listed on IDEAS
  14. repec:dgr:kubcen:200697 is not listed on IDEAS
  15. Ju, Y., 2004. "The Consensus Value for Games in Partition Function Form," Discussion Paper 2004-60, Tilburg University, Center for Economic Research.
  16. Bolger, E M, 1989. "A Set of Axioms for a Value for Partition Function Games," International Journal of Game Theory, Springer, vol. 18(1), pages 37-44.
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