Sequential Creation of Surplus and the Shapley Value

Mikel à lvarez-Mozos (), Inés MachoStadler () and David PérezCastrillo ()
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Mikel à lvarez-Mozos: Universitat de Barcelona and BEAT
Inés MachoStadler: Universitat Autónoma de Barcelona and BSE
David PérezCastrillo: Universitat Autónoma de Barcelona and BSE

No 2024/466, UB School of Economics Working Papers from University of Barcelona School of Economics

Abstract: We introduce the family of games with intertemporal externalities, where two disjoint sets of players play sequentially. Coalitions formed by the present cohort generate worth today. Moreover, today’s partition of players exerts an externality on the future; the worth of a coalition formed by future players is influenced by this externality. We adapt the classic Shapley axioms and study their implications in our class of games. They do not suffice to single out a unique solution. We introduce two values using the interpretation of the Shapley value as the players’ expected contributions to coalitions: the one-coalition externality value and the naive value. We state a relationship between these values and the Shapley value of an associated game in characteristic function form. Our main results characterize the two values by adding one additional property to the classic Shapley axioms. A property of equal treatment of contributions leads to characterizing the one-coalition externality value. A property of equal treatment of externalities characterizes the naive value.

Keywords: Shapley value; Externalities (search for similar items in EconPapers)
JEL-codes: C71 D62 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2024
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