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Stable agreements through liability rules: a multi-choice games approach to the social cost problem

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  • Kevin Techer

    (Univ Lyon, UJM Saint-Etienne, GATE UMR 5824, F-42023 Saint-Etienne, France)

Abstract

We consider a class of social cost problems where one polluter interacts with an arbitrary number of potential victims. Agents are supposed to cooperate and negotiate an optimal pollution level together with monetary transfers. We examine multi-choice cooperative games associated with a social cost problem and an assignment (or mapping) of rights. We introduce a class of mappings of rights that takes into account the pollution intensity and we consider three properties on mappings of rights: core compatibility, Kaldor-Hicks core compatibility and no veto power for a victim. We demonstrate that there exist only two families of mappings of rights that satisfy core compatibility. However, no mapping of rights satisfies Kaldor-Hicks core compatibility and no veto power for a victim.

Suggested Citation

  • Kevin Techer, 2020. "Stable agreements through liability rules: a multi-choice games approach to the social cost problem," Working Papers 2028, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    • Handle: RePEc:gat:wpaper:2028
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    References listed on IDEAS

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    More about this item

    Keywords

    Externality; Liability rules; Multi-choice cooperative game; Core;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • Q52 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Pollution Control Adoption and Costs; Distributional Effects; Employment Effects

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