A New Class of Welfare Maximizing Stable Sharing Rules for Partition Function Games with Externalities

Johan Eyckmans (), Michael Finus () and Lina Mallozzi
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Lina Mallozzi: University of Naples Federico II, Italy

No 2011/08, Working Papers from Hogeschool-Universiteit Brussel, Faculteit Economie en Management

Abstract: We propose a class of sharing rules for the distribution of the gains from cooperation for partition function games with externalities. We show that this class of sharing rules is characterized by three axioms: coalitional efficiency, additivity and anonimity which are adapted to the context of partition function games. The sharing rules stabilize, in the sense of d'Aspremont et al. (1983), the coalition which generates the highest global welfare among the set of potentially internally stable coalitions. The new class of sharing rules is particularly powerful for economic problems that are characterized by positive externalities from coalition formation (outsiders benefit from the expansion of the coalition) and which therefore often suffer from free-riding.

Keywords: partition function; coalition formation; externalities; surplus (search for similar items in EconPapers)
JEL-codes: C70 C71 (search for similar items in EconPapers)
Pages: 27 page
Date: 2011-07
New Economics Papers: this item is included in nep-gth and nep-net
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Related works:
Working Paper: A New Class of Welfare Maximizing Stable Sharing Rules for Partition Function Games with Externalities (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hub:wpecon:201108

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