A Non-cooperative Foundation of Core-Stability in Positive Externality NTU-Coalition Games

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Working paper
Michael Finus and Bianca Rundshagen
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We identify the core as an appealing stability concept of cooperative game theory, but argue that the non-cooperative approach has conceptual advantages in the context of economic problems with externalities. Therefore, we derive a non-cooperative foundation of core-stability for positive externality NTU-games. First, in the spirit of Hart/Kurz (1983), we develop a game that we call Η-game and show that strong Nash equilibria coalition structures in this game are identical to α- and β-core stable coalition structures. Second, as a by-product of the definition of the Η-game, we develop an extension called an Ι-game. Finally, we compare equilibria in the Η- and Ι-game with those in the ∆- and Γ-game of Hart and Kurz (1983).
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