On Convexity in Games with Externalities

Abstract

We introduce new notions of superadditivity and convexity for games with coalitional externalities. We show parallel results to the classic ones for transferable utility games without externalities. In superadditive games the grand coalition is the most efficient organization of agents. The convexity of a game is equivalent to having non decreasing contributions to larger embedded coalitions. We also see that convex games can only have negative externalities.