Sharing the global outcomes of finite natural resource exploitation: A dynamic coalitional stability perspective

Abstract

The article explores the implications of natural resource scarcity in terms of global cooperation and trade. We investigate whether there exist stable international long-term agreements that take into account the disparities between countries in terms of geological endowments and productive capacity, while caring about future generations. For that purpose, we build an original cooperative game framework, where countries can form coalitions in order to optimize their discounted consumption stream in the long-run, within the limits of their stock of natural resources. We use the concept of the strong sequential core that satisfies both coalitional stability and time consistency. We show that this set is nonempty, stating that an international long-term agreement along the optimal path will be self-enforcing. The presented model sets out a conceptual framework for exploring the fair sharing of the fruits of global economic growth.