Discussion Papers, Department of Business and Management Science, Norwegian School of Economics (NHH)
Coalition Formation with Externalities: The Case of the Northeast Atlantic Mackerel Fishery in a Pre and Post Brexit Context
() and Stein Ivar Steinshamn
Abstract: In this paper we apply the so-called partition function
approach to study coalition formation in the North-east Atlantic mackerel
fishery in the presence of externalities. Atlantic mackerel is mainly
exploited by the European Union (EU), the United Kingdom (UK), Norway, the
Faroe Islands and Iceland. Two games are considered. First, a four-player
game where the UK is still a member of the EU. Second, a five-player game
where the UK is no longer a member of the union. Each game is modelled in
two stages. In the first stage, players form coalitions following a
predefined set of rules. In the second stage, given the coalition structure
that has been formed, each coalition choose the economic strategy that
maximises its own net present value of the fishery given the behaviour of
the other coalitions. The game is solved using backward induction to obtain
the set of Nash equilibria coalition structures in pure strategies, if any.
We find out that the current management regime is among the stable
coalition structures in all eight scenarios of the four-player game, but in
only one case of the five-player game. In addition, stability in the
five-player game is sensitive to the growth function applied and the
magnitude of the stock elasticity parameter.
Keywords: Mackerel dispute; straddling fish stock; brexit; games in partition function form; externalities; coalition formation; coalition structure stability; (follow links to similar papers)
JEL-Codes: C71; C72; Q22; Q57; (follow links to similar papers)
48 pages, October 18, 2017
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