Wealth Sharing or Rights Sharing? Stable Coalitions in Resource Extraction on Networks

This paper investigates the formation of stable coalitions in a differential game of resource extraction where players’ resource deposits are interdependent and spatial relations between them are represented as a network. The network structure allows heterogeneity in the spatial distribution of extractable resources. We introduce a new framework for cooperative extraction in which, in addition to side payments, extraction rights can also be shared. The main contribution is the identification of conditions under which partial coalitions with more than three players can be stable, and under which the grand coalition can also be stable. Illustrative examples of such games are provided.