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An outside-option-sensitive allocation rule for networks: the kappa-value

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  • Julia Belau

    (TU Dortmund University and Ruhr Graduate School in Economics)

Abstract

How should we allocate worth among agents in cooperative models? The literature provides various examples suggesting that an allocation rule should take outside options into account (bargaining power, etc.) as well as the specific position of agents within the network describing the social or economic structure (trade, social networks, etc.). Existing allocation rules lack at least one of these properties, either generally or for a broad and important class of games. We define and characterize a new allocation rule for networks, the kappa-value, which takes into account both outside options and the position of the agents within the network. The characterization of the kappa-value only consists of known and approved axioms or weakened versions of them and provides an elegant use of the quite intuitive concept of the Shapley value of the arc game, the Position value, lacking its drawback of outside-option-insensitivity.

Suggested Citation

  • Julia Belau, 2013. "An outside-option-sensitive allocation rule for networks: the kappa-value," Economic Theory Bulletin, Springer;Society for the Advancement of Economic Theory (SAET), vol. 1(2), pages 175-188, November.
    • Handle: RePEc:spr:etbull:v:1:y:2013:i:2:d:10.1007_s40505-013-0019-z
    DOI: 10.1007/s40505-013-0019-z
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    References listed on IDEAS

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    Cited by:

    1. Daniel Li Li & Erfang Shan, 2021. "Cooperative games with partial information," International Journal of Game Theory, Springer;Game Theory Society, vol. 50(1), pages 297-309, March.
    2. Daniel Li Li & Erfang Shan, 2022. "Safety of links with respect to the Myerson value for communication situations," Operational Research, Springer, vol. 22(3), pages 2121-2131, July.

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    More about this item

    Keywords

    Cooperative games; Networks; Position value; Outside options;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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