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Cooperative game theory and its application to natural, environmental, and water resource issues : 1. basic theory

  • Parrachino, Irene
  • Zara, Stefano
  • Patrone, Fioravante
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    Game theory provides useful insights into the way parties that share a scarce resource may plan their use of the resource under different situations. This review provides a brief and self-contained introduction to the theory of cooperative games. It can be used to get acquainted with the basics of cooperative games. Its goal is also to provide a basic introduction to this theory, in connection with a couple of surveys that analyze its use in the context of environmental problems and models. The main models (bargaining games, transfer utility, and non-transfer utility games) and issues and solutions are considered: bargaining solutions, single-value solutions like the Shapley value and the nucleolus, and multi-value solutions such as the core. The cooperative game theory (CGT) models that are reviewed in this paper favor solutions that include all possible players and ignore the strategic stages leading to coalition building. They focus on the possible results of the cooperation by answering questions such as: Which coalitions can be formed? And how can the coalitional gains be divided to secure a sustainable agreement? An important aspect associated with the solution concepts of CGT is the equitable and fair sharing of the cooperation gains.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4072.

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    Date of creation: 01 Nov 2006
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    Handle: RePEc:wbk:wbrwps:4072
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