An Almost Ideal Sharing Scheme for Coalition Games with Externalities

24 Pages Posted: 14 Jan 2005

See all articles by Johan Eyckmans

Johan Eyckmans

Catholic University of Leuven (KUL) - Center for Economic Studies

Michael Finus

University of Stirling

Date Written: December 2004

Abstract

We propose a class of sharing schemes for the distribution of the gains from cooperation for coalition games with externalities. In the context of the partition function, it is shown that any member of this class of sharing schemes leads to the same set of stable coalitions in the sense of d'Aspremont et al. (1983). These schemes are "almost ideal" in that they stabilize these coalitions which generate the highest global welfare among the set of "potentially stable coalitions." Our sharing scheme is particularly powerful for economic problems that are characterized by positive externalities from coalition formation and which therefore are likely to suffer from severe free-riding.

Keywords: Coalition games, Partition function, Externalities, Sharing schemes

JEL Classification: C70, C71

Suggested Citation

Eyckmans, Johan and Finus, Michael, An Almost Ideal Sharing Scheme for Coalition Games with Externalities (December 2004). FEEM Working Paper No. 155.04. Available at SSRN: https://ssrn.com/abstract=643641 or http://dx.doi.org/10.2139/ssrn.643641

Johan Eyckmans (Contact Author)

Catholic University of Leuven (KUL) - Center for Economic Studies ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Michael Finus

University of Stirling ( email )

Stirling, Scotland FK9 4LA
United Kingdom

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