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The Balanced Threat Agreement for Individual Externality Negotiation Problems

Author

Listed:
  • Peter Borm

    (Tilburg University)

  • Yukihiko Funaki

    (Waseda University)

  • Yuan Ju

    (University of York)

Abstract

This paper introduces a model to analyze individual externalities and the associated negotiation problem, which has been largely neglected in the game theoretic literature. Following an axiomatic perspective, we propose a solution, as a payoff sharing scheme, called the balanced threat agreement, for such problems. It highlights an agent’s potential influences on all agents by threatening to enter or quit. We further study the solution by investigating its consistency. We also offer a discussion on the related stability issue.

Suggested Citation

  • Peter Borm & Yukihiko Funaki & Yuan Ju, 2020. "The Balanced Threat Agreement for Individual Externality Negotiation Problems," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 37(1), pages 67-85, November.
    • Handle: RePEc:spr:homoec:v:37:y:2020:i:1:d:10.1007_s41412-020-00097-7
    DOI: 10.1007/s41412-020-00097-7
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    References listed on IDEAS

    as
    1. 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.
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    9. Borm, Peter & Ju, Yuan & Wettstein, David, 2015. "Rational bargaining in games with coalitional externalities," Journal of Economic Theory, Elsevier, vol. 157(C), pages 236-254.
    10. Macho-Stadler, Ines & Perez-Castrillo, David & Wettstein, David, 2007. "Sharing the surplus: An extension of the Shapley value for environments with externalities," Journal of Economic Theory, Elsevier, vol. 135(1), pages 339-356, July.
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    More about this item

    Keywords

    Individual externalities; Negotiation; Balanced threat; Characterization; Consistency;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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