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Appears in Collections:Economics Working Papers
Peer Review Status: Unrefereed
Title: An Almost Ideal Sharing Scheme for Coalition Games with Externalities
Author(s): Eyckmans, Johan
Finus, Michael
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Citation: Eyckmans J & Finus M (2009) An Almost Ideal Sharing Scheme for Coalition Games with Externalities. Stirling Economics Discussion Paper, 2009-10.
Keywords: coalition games
partition function
sharing schemes
Externalities (Economics)
Public goods
Knowledge management Economic aspects
JEL Code(s): C70: Game Theory and Bargaining Theory: General
C71: Cooperative Games
Issue Date: 1-Apr-2009
Series/Report no.: Stirling Economics Discussion Paper, 2009-10
Abstract: Cooperative agreements among firms to coordinate R&D investments and share knowledge or coordination among nations to reduce trade barriers or to provide global public goods usually proves difficult due to free-rider incentives. In this paper, we propose a sharing scheme for the distribution of the gains from cooperation for games with externalities and heterogeneous players in order to mitigate free-rider problems. We show that every sharing rule belonging to our scheme leads to the same set of stable coalitions which is never empty. This scheme is “almost ideal” because it stabilizes those coalitions generating the highest possible global worth among the set of all “potentially stable coalitions”. Our Almost Ideal Sharing Scheme is particularly powerful for economic problems where outsiders benefit from the coalition’s actions (positive externalities) and which therefore are likely to suffer from severe free-riding.
Type: Working Paper
Affiliation: KU Leuven

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