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An Almost Ideal Sharing Scheme for Coalition Games with Externalities

Author

Listed:
  • Johan Eyckmans

    (Europese Hogeschool Brussel EHSAL and Katholieke Universiteit Leuven, Centrum voor Economische Studiën)

  • Michael Finus

    (Institute of Economic Theory, Department of Economics, University of Hagen)

Abstract

We propose a class of sharing schemes for the distribution of the gains from cooperation for coalition games with externalities. In the context of the partition function, it is shown that any member of this class of sharing schemes leads to the same set of stable coalitions in the sense of d’Aspremont et al. (1983). These schemes are “almost ideal” in that they stabilize these coalitions which generate the highest global welfare among the set of “potentially stable coalitions”. Our sharing scheme is particularly powerful for economic problems that are characterized by positive externalities from coalition formation and which therefore are likely to suffer from severe free-riding.

Suggested Citation

  • Johan Eyckmans & Michael Finus, 2004. "An Almost Ideal Sharing Scheme for Coalition Games with Externalities," Working Papers 2004.155, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2004.155
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    References listed on IDEAS

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    More about this item

    Keywords

    Coalition games; Partition function; Externalities; Sharing schemes;
    All these keywords.

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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