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CARTEL STABILITY UNDER AN OPTIMAL SHARING RULE *
Author(s) -
WEIKARD HANSPETER
Publication year - 2009
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/j.1467-9957.2009.02111.x
Subject(s) - cartel , externality , microeconomics , economics , stability (learning theory) , public goods game , public good , mathematical economics , class (philosophy) , computer science , collusion , machine learning , artificial intelligence
In this paper I analyse the stability of cartels in games with heterogeneous players and externalities. I introduce a class of sharing rules for coalition pay‐offs, called ‘optimal sharing rules’, that stabilize all cartels that are possibly stable under some arbitrary sharing rule. To illustrate the impact of optimal sharing with heterogeneous players and positive externalities I analyse a public goods game. In contrast to games with identical players that are common in the study of international environmental agreements, my results show that large coalitions may well be stable when optimal sharing is applied.