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Social Loss with Respect to the Core of an Economy with Externalities

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Abstract

We consider a pure exchange economy with externalities. We adopt a cooperative approach to equilibrium analysis, allowing each individual to cooperate with others and to form coalitions. Individual preferences are affected by the consumption of all other agents in the economy, and the consumption set of each agent is affected by the coalition to which he/she belongs. Following \cite{Montesano02}, we introduce a measure of social loss with respect to the $\gamma$-core and $\alpha$-core of the economy which completely characterizes the corresponding core allocations.

Suggested Citation

  • Christian Di Pietro & Maria Gabriella Graziano & Vincenzo Platino, 2019. "Social Loss with Respect to the Core of an Economy with Externalities," CSEF Working Papers 538, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  • Handle: RePEc:sef:csefwp:538
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    Keywords

    exchange economy; interdependent preferences; core; social loss;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers

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