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

Julia Belau

Economic Theory Bulletin, 2013, vol. 1, issue 2, No 9, 175-188

Abstract: 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.

Keywords: Cooperative games; Networks; Position value; Outside options (search for similar items in EconPapers)
JEL-codes: C71 D85 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s40505-013-0019-z

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