The risk-based core for cooperative games with uncertainty

László Kóczy ()

No 1906, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: In coalitional games with uncertain payoffs, a deviating coalition can only form expectations regarding its post-deviation payoff. Classical approaches address the problem from the side of conservatism, expecting the worst, or by explicit assumptions of the emerging state of the world. We borrow the idea of risk from the finance literature and compare the payoff of staying with the original outcome with the risk of deviating. Employing this idea to the core leads to a new concept that we call the risk-based core. We introduce this concept and discuss its properties. We find an inclusion relation between cores of games with increasingly conservative players. The model is also suitable to study cooperative games in partition function form where the value of a coalition depends on the entire partition. For the cores of such games our main result yields many of the familiar inclusion relations as corollaries, while the inclusion of the optimistic core in the optimistic recursive core turns out to be non-robust.

Keywords: Cooperative game theory; Core; Expectation formation rules; Risk, Risk measures; Partition function form games (search for similar items in EconPapers)
JEL-codes: C71 D82 G32 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2019-02
New Economics Papers: this item is included in nep-cdm and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.mtakti.hu/wp-content/uploads/2019/03/MTDP1906.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:has:discpr:1906

Access Statistics for this paper

More papers in CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies Contact information at EDIRC.
Bibliographic data for series maintained by Nora Horvath ( this e-mail address is bad, please contact ).