Values for environments with externalities - The average approach

Recognition Program

Authors: Inés Macho-Stadler, David Pérez-Castrillo and David Wettstein

Games and Economic Behavior, Vol. 108, 49-64, March, 2018

We propose the “average approach,” where the worth of a coalition is a weighted average of its worth for different partitions of the players' set, as a unifying method to extend values for characteristic function form games. Our method allows us to extend the equal division value, the equal surplus value, the consensus value, the λ-egalitarian Shapley value, and the family of least-square values. For each of the first three extensions, we also provide an axiomatic characterization of a particular value for partition function form games. And for each of the last two extensions, we find a family of values that satisfy the properties.

This paper originally appeared as Barcelona School of Economics Working Paper 919
This paper is acknowledged by the Barcelona GSE Research Recognition Program