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Stable Sets and Public Projects



We introduce von Neumann-Morgenstern solution concepts in market models involving the choice of a public project. We show that vN-M stable sets, suitably defined in connection to public goods provision, are consistent with results from bargaining via cartels. We find as necessary the assumption that stability is defined with respect to blocking procedures in which coalitions do not necessarily pay for the whole realization of the project, but only for a fraction of it and that costs are distributed uniformly in each corner of the market. Under this assumption, we obtain large games solutions by the finite ones via embedding procedures. Going further in the investigation of stable solutions, we define stable sets following the “sophisticated” approach suggested by Harsanyi (see [15] and [17]), proving that a sigma-sophisticated stable set corresponds to the solution in the associated payoff space.

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  • Maria Gabriella Graziano & Maria Romaniello, 2010. "Stable Sets and Public Projects," CSEF Working Papers 263, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:263

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    Public project; sigma-core; von Neumann-Morgenstern sigma-stable set; sigma-sophisticated stable sets;

    JEL classification:

    • D51 - Microeconomics - - General Equilibrium and Disequilibrium - - - Exchange and Production Economies
    • D60 - Microeconomics - - Welfare Economics - - - General
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods

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