Efficiency in Face of Externalities When Binding Hierarchical Agreements are Possible

16 Pages Posted: 23 Apr 2011 Last revised: 21 May 2011

See all articles by Jobst Heitzig

Jobst Heitzig

Potsdam-Institut für Klimafolgenforschung (PIK)

Date Written: May 19, 2011

Abstract

A formal framework for the treatment of hierarchical coalition formation and hierarchical agreements under both the bargaining and blocking approaches to coalition formation is introduced, and some first positive results on the possibility of full agreement and the efficiency of hierarchical agreements in face of externalities are given.

In particular, it is shown that the possibility of hierarchical agreements can lead to efficient outcomes in the standard Cournot oligopoly example and a certain public good example that can be seen as being relevant in the study of International Environmental Agreements.

Keywords: coalition formation, binding agreements, externalities, Cournot oligopoly

JEL Classification: C71, C78

Suggested Citation

Heitzig, Jobst, Efficiency in Face of Externalities When Binding Hierarchical Agreements are Possible (May 19, 2011). Available at SSRN: https://ssrn.com/abstract=1815328 or http://dx.doi.org/10.2139/ssrn.1815328

Jobst Heitzig (Contact Author)

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegraphenberg A 31
P.O. Box 60 12 03
Potsdam, Brandenburg 14412
Germany
+49 331 288-2692 (Phone)

HOME PAGE: http://www.pik-potsdam.de/members/heitzig

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