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Optimistic and pessimistic approaches for cooperative games

Author

Listed:
  • Ata Atay

    (Department of Mathematical Economics, Finance and Actuarial Sciences, and Barcelona Economic Analysis Team (BEAT), University of Barcelona, Spain)

  • Christian Trudeau

    (Department of Economics, University of Windsor)

Abstract

Cooperative game theory aims to study how to divide a joint value created by a set of players. These games are often studied through the characteristic function form with transferable utility, which represents the value obtainable by each coalition. In the presence of externalities, there are many ways to define this value. Various models that account for different levels of player cooperation and the influence of external players on coalition value have been studied. Although there are different approaches, typically, the optimistic and pessimistic approaches provide sufficient insights into strategic interactions. This paper clarifies the interpretation of these approaches by providing a unified framework. We show that making sure that no coalition receives more than their (optimistic) upper bounds is always at least as difficult as guaranteeing their (pessimistic) lower bounds. We also show that if externalities are negative, providing these guarantees is always feasible. Then, we explore applications and show how our findings can be applied to derive results from the existing literature.

Suggested Citation

  • Ata Atay & Christian Trudeau, 2024. "Optimistic and pessimistic approaches for cooperative games," Working Papers 2401, University of Windsor, Department of Economics.
    • Handle: RePEc:wis:wpaper:2401
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    References listed on IDEAS

    as
    1. Maniquet, Francois, 2003. "A characterization of the Shapley value in queueing problems," Journal of Economic Theory, Elsevier, vol. 109(1), pages 90-103, March.
    2. Feltkamp, V. & Tijs, S.H. & Muto, S., 1994. "On the irreducible core and the equal remaining obligations rule of minimum cost spanning extension problems," Other publications TiSEM 56ea8c64-a05f-4b3f-ab61-9, Tilburg University, School of Economics and Management.
    3. Chun, Youngsub, 2006. "A pessimistic approach to the queueing problem," Mathematical Social Sciences, Elsevier, vol. 51(2), pages 171-181, March.
    4. Feltkamp, V. & Tijs, S.H. & Muto, S., 1994. "On the irreducible core and the equal remaining obligations rule of minimum cost spanning extension problems," Discussion Paper 1994-106, Tilburg University, Center for Economic Research.
    5. S. C. Littlechild & G. Owen, 1973. "A Simple Expression for the Shapley Value in a Special Case," Management Science, INFORMS, vol. 20(3), pages 370-372, November.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Cooperative games; optimization problems; cost sharing; core; anti-core; externalities.;
    All these keywords.

    JEL classification:

    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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