Stability of covers under different rights structures

Abstract

A countryís social welfare depends on Örmsí proÖts and consumersí surplus. Given unions of countries, a countryís aim is to maximize its own social welfare when it decides to enter or exit a union. For examining unions, we use the notion of a cover as elaborated in Koray (2007).We utilize the Öndings of Ilk¨l¨Á · (2010) about the Cournot equilibrium in our setting to examine core stability and e¢ ciency of covers of countries.We adapt di§erent rightsístructures based on; free exit, free entry, approved exit and approved entry introduced by Sertel (1992) to the context of covers, along with introducing some stronger structures and study how stability of covers varies when linkage costs are imposed upon countries.