Cooperative decision-making for the provision of a locally undesirable facility

Abstract

We consider the decentralized provision of a global public good with local externalities in a spatially explicit model. Communities decide on the location of a facility that benets everyone but exhibits costs to the host and its neighbors. They share the costs through transfers. We examine the cooperative game associated with this so-called NIMBY (Not In My Back-Yard") problem. We derive and discuss conditions for core solutions to exist. These conditions are driven by the temptation to exclude groups of neighbors at any potential location. We illustrate the results in dierent spatial settings. In particular, we construct a hypothetical example on a real administrative unit in which the core is shown to be empty. These results clarify how property rights can aect cooperation and shed further light on a limitation of the Coase theorem.

The social cost problem, rights, and the (non)empty core

“…Attempts were made to generalize it—in particular because Ronald Coase, in “The Problem of Social Cost" (1960), reasoned with two agents only—or to demonstrate under which conditions it is verified—because of its assumption of zero transaction costs. The models were then developed in terms of competitive equilibrium (e.g., Chipman & Tian, ; Hurwicz, ), (perfect) Nash equilibrium of a strategic/bargaining game (e.g., Anderlini & Felli, , ; Ellingsen & Paltseva, ; Lee & Sabourian, ), of the nonemptiness of the core of a cooperative game (e.g., Aivazian & Callen, ; Aivazian, Callen, & Lipnowski, ; Ambec & Kervinio, ; Coase, ; Shapley & Shubik, ). In this paper, we also adopt a cooperative approach.…”

Stable Agreements through Liability Rules: A Multi-Choice Games Approach to the Social Cost Problem

“…Using a simple game authors show that the core of the garbage game is non-empty if and only if no more than two agents are involved. In the same spirit, Ambec and Kervinio (2016) analyzes the Not In My Back Yard (NIMBY) problem. In comparison to the garbage game, the NIMBY problem consider the location of a locally undesirable but globally desirable facility.…”

A mechanism for the efficient provision of Potential Pareto public goods

“…Our model abstains from two aspects. First, unlike Waehrer (2003) and Ambec and Kervinio (2016), we do not consider spatial effects and implicitly assume that the facility's costs are encapsulated in the hosting community. Abandoning this assumption will increase the complexity of our mechanism because having more than two types (due to buyers' proximity) would increase the message's submitted prices.…”