Cost of complexity in implementing the Shapley value by choosing a proposer through a bidding procedure

Michela Chessa, Nobuyuki Hanaki, Aymeric Lardon and Takashi Yamada

ISER Discussion Paper from Institute of Social and Economic Research, The University of Osaka

Abstract: We experimentally compare a simplified version of two mechanisms that implement the Shapley value as an (ex ante) equilibrium outcome of a noncooperative bargaining procedure: one proposed by Hart and Mas-Colell (1996, H-MC) and the other by Pérez-Castrillo and Wettstein (2001, PC-W). While H-MC induces the Shapley value only on average, PC-W does so as a unique equilibrium outcome by introducing an additional bidding stage on top of H-MC. We investigate the effect of this additional complexity that PC-W introduces on the resulting outcomes such as the frequency of grand coalition formation, efficiency, and the distance between the realized allocation and the Shapley value. Our experiment shows that H-MC not only results in significantly greater efficiency than PC-W, but also the average allocation is closer to the Shapley value for those groups that formed the grand coalition.

Date: 2022-05
New Economics Papers: this item is included in nep-exp and nep-gth
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