This presentation is based on a work co-authored with Ulrike Kornek and Kai Lessman.

To study the stability of coalitions in the standard game theoretic model of international environmental agreements, two alternative concepts are used: potential internal stability (PIS) and core stability (CS). Both concepts make use of the possibility of reallocating payoffs within a coalition, which amounts to assuming transferable utility (TU) among the players. For international applications where players are countries, such as done in the growing literature on integrated assessment models (IAM), non transferable utility (NTU) games would be economically better suited.

In this note, we provide a framework for comparing the treatment of coalitions in five game theoretically minded IAMs, form 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 core stability of coalitions can be tested by solving a simple optimization problem.

This seminar has been jointly organized by FEEM and IEFE, Bocconi University.