CARTEL STABILITY UNDER AN OPTIMAL SHARING RULE

Hans-Peter Weikard ()

Manchester School, 2009, vol. 77, issue 5, pages 575-593

Abstract: In this paper I analyse the stability of cartels in games with heterogeneous players and externalities. I introduce a class of sharing rules for coalition pay-offs, called 'optimal sharing rules', that stabilize all cartels that are possibly stable under some arbitrary sharing rule. To illustrate the impact of optimal sharing with heterogeneous players and positive externalities I analyse a public goods game. In contrast to games with identical players that are common in the study of international environmental agreements, my results show that large coalitions may well be stable when optimal sharing is applied. Copyright © 2009 The Author. Journal compilation © 2009 Blackwell Publishing Ltd and The University of Manchester.

Date: 2009
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Working Paper: Cartel Stability under an Optimal Sharing Rule (2005)
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