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Values for environments with externalities – The average approach

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  • Macho-Stadler, Inés
  • Pérez-Castrillo, David
  • Wettstein, David

Abstract

We propose the “average approach,” where the worth of a coalition is a weighted average of its worth for different partitions of the players' set, as a unifying method to extend values for characteristic function form games. Our method allows us to extend the equal division value, the equal surplus value, the consensus value, the λ-egalitarian Shapley value, and the family of least-square values. For each of the first three extensions, we also provide an axiomatic characterization of a particular value for partition function form games. And for each of the last two extensions, we find a family of values that satisfy the properties.

Suggested Citation

  • Macho-Stadler, Inés & Pérez-Castrillo, David & Wettstein, David, 2018. "Values for environments with externalities – The average approach," Games and Economic Behavior, Elsevier, vol. 108(C), pages 49-64.
    • Handle: RePEc:eee:gamebe:v:108:y:2018:i:c:p:49-64
    DOI: 10.1016/j.geb.2017.08.003
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    Cited by:

    1. Ines Macho-Stadler & David Perez-Castrillo & David Wettstein, 2017. "Extensions Of The Shapley Value For Environments With Externalities," Working Papers 1716, Ben-Gurion University of the Negev, Department of Economics.
    2. Andrea Caggese & Ander Pérez-Orive, 2017. "Capital Misallocation and Secular Stagnation," Finance and Economics Discussion Series 2017-009, Board of Governors of the Federal Reserve System (U.S.).
    3. Peter Borm & Yukihiko Funaki & Yuan Ju, 2020. "The Balanced Threat Agreement for Individual Externality Negotiation Problems," Homo Oeconomicus: Journal of Behavioral and Institutional Economics, Springer, vol. 37(1), pages 67-85, November.
    4. Enzo Lenine, 2020. "Modelling Coalitions: From Concept Formation to Tailoring Empirical Explanations," Games, MDPI, vol. 11(4), pages 1-12, November.

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    More about this item

    Keywords

    Externalities; Sharing the surplus; Average approach;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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