A Sequential Approach to the Characteristic Function and the Core in Games with Externalities

FEEM Working Paper No. 11.2001

Springer Verlag, ADVANCES IN ECONOMIC DESIGN, S. Koray, M.R. Sertel, eds., pp. 233-250, Berlin & London, 2003

20 Pages Posted: 7 Jul 2001

See all articles by Sergio Currarini

Sergio Currarini

University of Leicester - Department of Economics; Ca Foscari University of Venice - Dipartimento di Economia

Marco A. Marini

University of Rome La Sapienza; CREI, University Rome III

Date Written: January 2001

Abstract

This paper proposes a formulation of coalitional payoff possibilities in games with externalities, based on the assumption that forming coalitions can exploit a first mover advantage. We derive a characteristic function and show that when outside players play their best response noncooperatively, the core is always nonempty when the game has strategic complementarities. We apply this result to cartel formation in Bertrand oligopoly and in Shapley-Shubik (1977) strategic market games.

Keywords: core, cooperative games, externalities

JEL Classification: C7

Suggested Citation

Currarini, Sergio and Marini, Marco A., A Sequential Approach to the Characteristic Function and the Core in Games with Externalities (January 2001). FEEM Working Paper No. 11.2001, Springer Verlag, ADVANCES IN ECONOMIC DESIGN, S. Koray, M.R. Sertel, eds., pp. 233-250, Berlin & London, 2003 , Available at SSRN: https://ssrn.com/abstract=275128 or http://dx.doi.org/10.2139/ssrn.275128

Sergio Currarini (Contact Author)

University of Leicester - Department of Economics ( email )

Department of Economics
Leicester LE1 7RH, Leicestershire LE1 7RH
United Kingdom

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

Marco A. Marini

University of Rome La Sapienza ( email )

Piazzale Aldo Moro, 5
Rome, 00181
Italy
+39 06 49910843 (Phone)

HOME PAGE: http://sites.google.com/a/uniroma1.it/marcomarini-eng/

CREI, University Rome III ( email )

Via Ostiense, 161
Rome, 00154
Italy

HOME PAGE: http://host.uniroma3.it/centri/crei/

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