Values for Environments with Externalities – The Average Approach

• Authors: David Wettstein, David Pérez-Castrillo and Inés Macho-Stadler.
• BSE Working Paper: 919 | July 16
• Keywords: Externalities , sharing the surplus , average approach
• JEL codes: D62, C71
• Externalities
• sharing the surplus
• average approach

We propose the average approach,where the worth of a coalition is a weighted average of its worth for di⁄erent partitions of the playersset, 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 -egalitarian Shapley value, and the least-square family. For each of the rst 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 nd a family of values that satisfy the properties.