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A Non-cooperative Approach to the Compensation Rules for Primeval Games

Author

Listed:
  • Ju, Y.

    (Tilburg University, Center For Economic Research)

  • Borm, P.E.M.

    (Tilburg University, Center For Economic Research)

Abstract

To model inter-individual externalities and analyze the associated compensation issue, Ju and Borm (2005) introduces a new game-theoretic framework, primeval games, and proposes, from a cooperative perspective, three compensation rules as solution concepts for primeval games: the marginalistic rule, the concession rule, and the primeval rule. In this paper, we provide a non-cooperative approach to address these problems more specifically. Inspired by the generalized bidding approach (Ju and Wettstein (2006)) for TU games, we design various bidding mechanisms to fit the model of primeval games and show that each implements the corresponding compensation rule in subgame perfect equilibrium. These mechanisms require nearly no condition on the game environment and obtain each solution itself rather than in expected terms. Moreover, since the various mechanisms share a common basic structure, this paper offers a non-cooperative benchmark to compare different axiomatic solutions, which, in return, may advance the axiomatic study of the issue by constructing alternative compensation rules.
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Suggested Citation

  • Ju, Y. & Borm, P.E.M., 2006. "A Non-cooperative Approach to the Compensation Rules for Primeval Games," Discussion Paper 2006-97, Tilburg University, Center for Economic Research.
    • Handle: RePEc:tiu:tiucen:0bc72bc7-9350-48e3-90c4-efa03b2bdd74
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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.
    2. Ju, Yuan & Borm, Peter, 2008. "Externalities and compensation: Primeval games and solutions," Journal of Mathematical Economics, Elsevier, vol. 44(3-4), pages 367-382, February.
    3. Yuan Ju & Peter Borm & Pieter Ruys, 2007. "The consensus value: a new solution concept for cooperative games," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 28(4), pages 685-703, June.
    4. R. H. Coase, 2013. "The Problem of Social Cost," Journal of Law and Economics, University of Chicago Press, vol. 56(4), pages 837-877.
    5. Perez-Castrillo, David & Wettstein, David, 2001. "Bidding for the Surplus : A Non-cooperative Approach to the Shapley Value," Journal of Economic Theory, Elsevier, vol. 100(2), pages 274-294, October.
    6. Kim Hang Pham Do & Henk Norde, 2007. "The Shapley Value For Partition Function Form Games," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 9(02), pages 353-360.
    7. Yuan Ju & David Wettstein, 2009. "Implementing cooperative solution concepts: a generalized bidding approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(2), pages 307-330, May.
    8. R. M. Thrall & W. F. Lucas, 1963. "N‐person games in partition function form," Naval Research Logistics Quarterly, John Wiley & Sons, vol. 10(1), pages 281-298, March.
    9. Yuan Ju & David Wettstein, 2009. "Implementing cooperative solution concepts: a generalized bidding approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(2), pages 307-330, May.
    10. Varian, Hal R, 1994. "A Solution to the Problem of Externalities When Agents Are Well-Informed," American Economic Review, American Economic Association, vol. 84(5), pages 1278-1293, December.
    11. Bolger, E M, 1989. "A Set of Axioms for a Value for Partition Function Games," International Journal of Game Theory, Springer;Game Theory Society, vol. 18(1), pages 37-44.
    12. Inés Macho-Stadler & David Pérez-Castrillo & David Wettstein, 2004. "Sharing the surplus: A just and efficient proposal for environments with externalities," UFAE and IAE Working Papers 611.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
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    Cited by:

    1. Ju, Yuan & Borm, Peter, 2008. "Externalities and compensation: Primeval games and solutions," Journal of Mathematical Economics, Elsevier, vol. 44(3-4), pages 367-382, February.
    2. Ju, Yuan & Borm, Peter, 2008. "Externalities and compensation: Primeval games and solutions," Journal of Mathematical Economics, Elsevier, vol. 44(3-4), pages 367-382, February.

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    More about this item

    Keywords

    externality; compensation; primeval games; marginalistic rule; concession rule; primeval rule; bidding mechanism; implementation;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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