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Sharing the proceeds from a hierarchical venture

Jens Hougaard (), Juan Moreno-Ternero (), Mich Tvede and Lars Peter Østerdal

Games and Economic Behavior, 2017, vol. 102, issue C, 98-110

Abstract: We consider the problem of distributing the proceeds generated from a joint venture in which the participating agents are hierarchically organized. We introduce and characterize a family of allocation rules where revenue ‘bubbles up’ in the hierarchy. The family is flexible enough to accommodate the no-transfer rule (where no revenue bubbles up) and the full-transfer rule (where all the revenues bubble up to the top of the hierarchy). Intermediate rules within the family are reminiscent of popular incentive mechanisms for social mobilization or multi-level marketing.

Keywords: Hierarchies; Joint ventures; Resource allocation; Geometric rules; MIT strategy (search for similar items in EconPapers)
JEL-codes: C71 D63 L24 M31 M52 (search for similar items in EconPapers)
Date: 2017
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