To model inter-individual externalities and analyze the associated compensation issue, Ju and Borm (2005) introduces a new game-theoretic framework, primeval games, and proposes, from a cooperative perspective, three compensation rules as solution concepts for primeval games: the marginalistic...

The classical literature (Pigou (1920), Coase (1960), Arrow (1970)) and the relatively recent studies (cf. Varian (1994)) associate the externality problem with efficiency. This paper focuses explicitly on the compensation problem in the context of externalities. To capture the features of...