Essays in Bargaining and Cooperative Game Theory with an Application to Environmental Negotiations

Even when cooperation is clearly advantageous, attaining it is not to be taken for granted. In fact, in order to undertake a mutually beneficial joint activity, the parties must agree on the division of the gains granted by it. The self-interested nature that is supposed to characterize the same parties might then become a serious obstacle to the collectively rational choice of cooperating. Bargaining and Cooperative Game Theory are the two principal frameworks that are used by economists to investigate this puzzling but fascinating problem. In particular, if the latter proposes solutions to hypothetical bargaining problems according to normative principles such as egalitarianism and marginalism, the former examine the same problem from a positive perspective focusing on the relation between the rules of the bargaining process and its outcomes. The present Doctoral Thesis employs both these frameworks in a complementary way. Specifically, it proposes two novel solution concepts for transferable utility games in characteristic function form and a bargaining model whose outcome is exactly one of such solutions. It further compares different solution concepts with regard to their redistributive properties and their resilience to free riding. The Doctoral Thesis is composed by four standing alone, but interlinked, works forming the four chapters in which it is divided. Chapter 1 offers a literature review of bargaining models. Chapter 2 presents the two novel solution concepts: the Central Core and the Mid-central Core. Chapter 3 proposes the Burning Coalition Bargaining Model, a non cooperative bargaining model whose outcome, under a specific response strategy profile, is the Mid-central Core. Finally, Chapter 4 benchmarks different solution concepts through a numerical simulation based on an environmental game.