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

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, nontransferable 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. 1 Postdam Institute for Climate Impact Research, D-14412 Postdam, Germany. E-mail: [email protected] 2 Postdam Institute for Climate Impact Research, D-14412 Postdam, Germany. 3 Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium. E-mail: [email protected] This paper is one of the products of an informal group on coalition models comparison that met at PIK, Potsdam in February 2012 and at FEEM, Venice, in January 2013. Another paper from that group (Lessmann et al., 2014) is mentioned in the references section. Thanks are due to the organizers of the two meetings, as well as to the institutions that financed them. Tulkens is indebted to both FEEM and CORE for their support of the present research.