An Almost Ideal Sharing Scheme for Coalition Games with Externalities

Johan Eyckmans () and Michael Finus ()

No 2009-10, Stirling Economics Discussion Papers from University of Stirling, Division of Economics

Abstract: Cooperative agreements among firms to coordinate R&D investments and share knowledge or coordination among nations to reduce trade barriers or to provide global public goods usually proves difficult due to free-rider incentives. In this paper, we propose a sharing scheme for the distribution of the gains from cooperation for games with externalities and heterogeneous players in order to mitigate free-rider problems. We show that every sharing rule belonging to our scheme leads to the same set of stable coalitions which is never empty. This scheme is "almost ideal" because it stabilizes those coalitions generating the highest possible global worth among the set of all "potentially stable coalitions". Our Almost Ideal Sharing Scheme is particularly powerful for economic problems where outsiders benefit from the coalition's actions (positive externalities) and which therefore are likely to suffer from severe free-riding.

Keywords: coalition games; partition function; externalities; sharing schemes (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-gth and nep-net
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Citations: View citations in EconPapers (15)

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http://hdl.handle.net/1893/1078

Related works:
Working Paper: An Almost Ideal Sharing Scheme for Coalition Games with Externalities (2004)
Working Paper: An Almost Ideal Sharing Scheme for Coalition Games with Externalities (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:stl:stledp:2009-10

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