Partial cooperation in strategic multi-sided decision situations

Chakrabarti, Subhadip, Gilles, Robert P. and Lazarova, Emiliya (2018) Partial cooperation in strategic multi-sided decision situations. Theory and Decision, 85 (3-4). 455–478. ISSN 0040-5833

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      Abstract

      We consider a normal-form game in which there is a single exogenously given coalition of cooperating players that can write a binding agreement on pre-selected actions. The actions representing other dimensions of the strategy space remain under the sovereign, individual control of the players. We consider a standard extension of the Nash equilibrium concept denoted as a partial cooperative equilibrium as well as an equilibrium concept in which the coalition of cooperators has a leadership position. Existence results are stated and we identify conditions under which the various equilibrium concepts are equivalent. We apply this framework to existing models of multi-market oligopolies and international pollution abatement. In a multi-market oligopoly, typically, a merger paradox emerges in the partial cooperative equilibrium. The paradox vanishes if the cartel attains a leadership position. For international pollution abatement treaties, cooperation by a sufficiently large group of countries results in a Pareto improvement over the standard tragedy of the commons outcome described by the Nash equilibrium.

      Item Type: Article
      Uncontrolled Keywords: non-cooperative game,partial cooperation,partial cooperative equilibrium,leadership equilibrium,multi-market oligopoly,international pollution abatement
      Faculty \ School: Faculty of Social Sciences > School of Economics
      Depositing User: LivePure Connector
      Date Deposited: 18 Jun 2018 13:30
      Last Modified: 08 Feb 2019 01:13
      URI: https://ueaeprints.uea.ac.uk/id/eprint/67387
      DOI: 10.1007/s11238-018-9666-8

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