On Cooperative Games Affected by Negative Externality

We model cooperative games when externality affects the payoffs of coalitions. The co-alitional games among countries committing to pollution reduction can be easily embedded into such a framework. We evaluate the individual welfare for countries joining the International Environmental Agreements and discuss suitable allocations of welfare depending on the characteristics of the single environmentally-concerned countries. Finally we assess the level of environmental externality beyond which each country’s welfare decreases as its propensity to pollute increases