Strategic Non-Participation

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Abstract
We study a model that involves identity-dependent, asymmetric negative external effects. Willingness to pay, which can be computed only in equilibrium, will reflect, besides private valuations, also preemptive incentives stemming from the desire to minimize the negative externalities. We find that the best strategy of some agents is simply not to participate in the market, although they cannot in this way avoid the negative extern effects. Finally we show that, even when we allow full communication and side-payments between the agents, all coalitional agreements are unstable.
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