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Cooperation with Externalities and Uncertainty

Author

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  • Habis , Helga

    (Department of Economics, Lund University)

  • Csercsik, Dávid

    (Institute of Economics, Research Centre for Economic and Regional Studies, Hungarian Academy)

Abstract

We introduce a new class of cooperative games where the worth of a coalition depends on the behavior of other players and on the state of nature as well. We allow for coalitions to form both before and after the resolution of uncertainty, hence agreements must be stable against both types of deviations. The appropriate extension of the classical core concept, the Sustainable Core, is defined for this new setup to test the stability of allocations in such a complex environment. A prominent application, a game of consumers and generators on an electrical energy transmission network is examined in details, where the power in- and outlets of the nodes have to be determined in a way, that if any line instantaneously fails, none of the remaining lines may be overloaded. We show that fulfilling this safety requirement in a mutually acceptable way can be achieved by choosing an element in the Sustainable Core.

Suggested Citation

  • Habis , Helga & Csercsik, Dávid, 2012. "Cooperation with Externalities and Uncertainty," Working Papers 2012:27, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2012_027
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    References listed on IDEAS

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    13. SMEERS, Yves, 2003. "Market incompleteness in regional electricity transmission. Part II: the forward and real time markets," LIDAM Reprints CORE 1633, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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    Cited by:

    1. Dávid Csercsik & László Á. Kóczy, 2017. "Efficiency and Stability in Electrical Power Transmission Networks: a Partition Function Form Approach," Networks and Spatial Economics, Springer, vol. 17(4), pages 1161-1184, December.
    2. Csercsik, Dávid & Hubert, Franz & Sziklai, Balázs R. & Kóczy, László Á., 2019. "Modeling transfer profits as externalities in a cooperative game-theoretic model of natural gas networks," Energy Economics, Elsevier, vol. 80(C), pages 355-365.
    3. László Á. Kóczy, 2018. "Partition Function Form Games," Theory and Decision Library C, Springer, number 978-3-319-69841-0, December.
    4. repec:diw:diwwpp:dp1301 is not listed on IDEAS
    5. Lotte Verdonck & Katrien Ramaekers & Benoît Depaire & An Caris & Gerrit K. Janssens, 2019. "Analysing the Effect of Partner Characteristics on the Performance of Horizontal Carrier Collaborations," Networks and Spatial Economics, Springer, vol. 19(2), pages 583-609, June.
    6. Jan Abrell & Friedrich Kunz, 2015. "Integrating Intermittent Renewable Wind Generation - A Stochastic Multi-Market Electricity Model for the European Electricity Market," Networks and Spatial Economics, Springer, vol. 15(1), pages 117-147, March.
    7. Laszlo A. Koczy, 2019. "The risk-based core for cooperative games with uncertainty," CERS-IE WORKING PAPERS 1906, Institute of Economics, Centre for Economic and Regional Studies.
    8. Dávid Csercsik, 2016. "Competition and Cooperation in a Bidding Model of Electrical Energy Trade," Networks and Spatial Economics, Springer, vol. 16(4), pages 1043-1073, December.

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    More about this item

    Keywords

    partition function form games; uncertainty; core; sustainability;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L94 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Electric Utilities

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