Transferable and non transferable utility implementations of coalitional stability in integrated assessment models

Urik Kornek (), Kai Lessmann and Henry Tulkens
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Urik Kornek: Postdam Institute for Climate Impact Research

No 2014035, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: To study the stability of coalitions in the standard game theoretic model of international environmental agreements, two alternative concepts are used: potential internal stability and core stability. Both concepts make use of the possibility of reallocating payoffs within a coalition through transfers, formulated in terms of transferable utility among the players. For international applications where players are countries, such as done in the growing literature on integrated assessment models, non-transferable utility games would be economically better suited. In this note, we provide a framework for comparing the treatment of coalitions in five game theoretically minded integrated assessment models, from that point of view. Under way, we extend the definition of the two stability concepts to games without transferable utility, assuming instead the transferability of some physical good. We also show that potential internal stability and blocking power of coalitions can be tested by solving a simple optimization problem.

Date: 2014-11-05
New Economics Papers: this item is included in nep-gth and nep-upt
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