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Externalities and the Nucleolus

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  • Mikel ÁLVAREZ-MOZOS
  • Lars EHLERS

Abstract

In most economic applications, externalities prevail: the worth of a coalition depends on how the other players are organized. We show that there is a unique natural way of extending the nucleolus from (coalitional) games without externalities to games with externalities. This is in contrast to the Shapley value and the core for which many different extensions have been proposed.

Suggested Citation

  • Mikel ÁLVAREZ-MOZOS & Lars EHLERS, 2017. "Externalities and the Nucleolus," Cahiers de recherche 08-2017, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
    • Handle: RePEc:mtl:montec:08-2017
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    References listed on IDEAS

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    1. Dutta, Bhaskar & Ehlers, Lars & Kar, Anirban, 2010. "Externalities, potential, value and consistency," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2380-2411, November.
    2. Geoffroy de Clippel & Roberto Serrano, 2008. "Marginal Contributions and Externalities in the Value," Econometrica, Econometric Society, vol. 76(6), pages 1413-1436, November.
    3. László Kóczy, 2007. "A recursive core for partition function form games," Theory and Decision, Springer, vol. 63(1), pages 41-51, August.
    4. Bloch, Francis & van den Nouweland, Anne, 2014. "Expectation formation rules and the core of partition function games," Games and Economic Behavior, Elsevier, vol. 88(C), pages 339-353.
    5. SCHMEIDLER, David, 1969. "The nucleolus of a characteristic function game," LIDAM Reprints CORE 44, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. 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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    Cited by:

    1. Elena Iñarra & Roberto Serrano & Ken-Ichi Shimomura, 2020. "The Nucleolus, the Kernel, and the Bargaining Set: An Update," Revue économique, Presses de Sciences-Po, vol. 71(2), pages 225-266.
    2. Li, Tingting & Chen, Junlin, 2020. "Alliance formation in assembly systems with quality-improvement incentives," European Journal of Operational Research, Elsevier, vol. 285(3), pages 931-940.

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    Keywords

    externalities; partition function; nucleolus; reduced game;
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