Consolidating Marginalism and Egalitarianism: A New Value for Transferable Utility Games
20 Pages Posted: 13 Nov 2020
Date Written: November 13, 2020
In cooperative games with transferable utilities, the Shapley value is an extreme case of marginalism while the Equal Division rule is an extreme case of egalitarianism. The Shapley value does not assign anything to the non-productive players and the Equal Division rule does not concern itself to the relative efficiency of the players in generating a resource. However, in real life situations neither of them is a good fit for the fair distribution of resources as the society is neither devoid of solidarity nor it can be indifferent to rewarding the relatively more productive players. Thus a trade-off between these two extreme cases has caught attention from many researchers. In this paper, we obtain a new value for cooperative games with transferable utilities that adopts egalitarianism in smaller coalitions on one hand and on the other hand takes care of the players' marginal productivity in sufficiently large coalitions. Our value is identical with the Shapley value on one extreme and the Equal Division rule on the other extreme. We provide four characterizations of the value using variants of standard axioms in the literature. We also provide a mechanism that implements our value in sub-game perfect Nash equilibrium.
Keywords: Shapley value, Equal Division rule, Solidarity, Egalitarian Shapley value
JEL Classification: C71, D60
Suggested Citation: Suggested Citation