Groupe d’études et de recherche en analyse des décisions

G-99-22

Time-Consistent Shapley Value Allocation of Pollution Cost Reduction

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We study the problem of allocation over time of total cost incurred by countries in a cooperative game of pollution reduction. We compute the characteristic function for all possible coalitions and apply the Shapley value to determine a fair distribution of the total cooperative cost among players. We design a mechanism for allocation over time of total individual cost so that each player finds it optimal to stick to cooperation for the whole duration of the game.

, 16 pages