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A Non-cooperative Approach to the Compensation Rules for Primeval Games

  • Yuan Ju

    ()

    (Department of Economics, Keele,)

  • Peter Borm

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

To model inter-individual externalities and analyze the associated compensation issue, Ju and Borm (2005) introduces a new game-theoretic framework, primeval games, and proposes, from a cooperative perspective, three compensation rules as solution concepts for primeval games: the marginalistic rule, the concession rule, and the primeval rule. In this paper, we provide a non-cooperative approach to address these problems more specifically. Inspired by the generalized bidding approach (Ju and Wettstein (2006)) for TU games, we design various bidding mechanisms to fit the model of primeval games and show that each implements the corresponding compensation rule in subgame perfect equilibrium. These mechanisms require nearly no condition on the game environment and obtain each solution itself rather than in expected terms. Moreover, since the various mechanisms share a common basic structure, this paper offers a non-cooperative benchmark to compare different axiomatic solutions, which, in return, may advance the axiomatic study of the issue by constructing alternative compensation rules.

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File URL: http://www.keele.ac.uk/depts/ec/wpapers/kerp0618.pdf
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Paper provided by Centre for Economic Research, Keele University in its series Keele Economics Research Papers with number KERP 2006/18.

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Length: 21 pages
Date of creation: Sep 2006
Date of revision:
Handle: RePEc:kee:kerpuk:2006/18
Note: We thank Eric van Damme and David Wettstein for helpful suggestions and discussions. We also appreciate the comments from the participants at the 2nd Spain Italy Netherlands Meeting on Game Theory in Foggia, Italy.
Contact details of provider: Postal: Department of Economics, University of Keele, Keele, Staffordshire, ST5 5BG - United Kingdom
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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
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  1. repec:dgr:kubcen:200642 is not listed on IDEAS
  2. 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.
  3. Ju, Y., 2004. "The Consensus Value for Games in Partition Function Form," Discussion Paper 2004-60, Tilburg University, Center for Economic Research.
  4. Ju, Y. & Wettstein, D., 2006. "Implementing Cooperative Solution Concepts : A Generalized Bidding Approach," Discussion Paper 2006-42, Tilburg University, Center for Economic Research.
  5. David Pérez-Castrillo & David Wettstein, . "Bidding For The Surplus: A Non-Cooperative Approach To The Shapley Value," UFAE and IAE Working Papers 461.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  6. Varian, Hal R, 1994. "A Solution to the Problem of Externalities When Agents Are Well-Informed," American Economic Review, American Economic Association, vol. 84(5), pages 1278-93, December.
  7. Kim Hang Pham Do & Henk Norde, 2007. "The Shapley Value For Partition Function Form Games," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 353-360.
  8. repec:dgr:kubcen:20024 is not listed on IDEAS
  9. repec:dgr:kubcen:200460 is not listed on IDEAS
  10. repec:dgr:kubcen:200450 is not listed on IDEAS
  11. 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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