Values for Environments with Externalities - The Average Approach

32 Pages Posted: 23 Aug 2016

See all articles by Ines Macho-Stadler

Ines Macho-Stadler

Universidad Autonoma de Barcelona; Barcelona Graduate School of Economics (Barcelona GSE); CESifo (Center for Economic Studies and Ifo Institute)

David Pérez-Castrillo

Universidad Autonoma de Barcelona; CESifo (Center for Economic Studies and Ifo Institute)

David Wettstein

Ben-Gurion University of the Negev

Date Written: July 21, 2016

Abstract

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 least-square family. 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.

Keywords: externalities, sharing the surplus, average approach

JEL Classification: D620, C710

Suggested Citation

Macho-Stadler, Ines and Pérez-Castrillo, David and Wettstein, David, Values for Environments with Externalities - The Average Approach (July 21, 2016). CESifo Working Paper Series No. 6002, Available at SSRN: https://ssrn.com/abstract=2827508

Ines Macho-Stadler

Universidad Autonoma de Barcelona ( email )

Departamento de Economia e Historia Economica
08193 Barcelona
Spain

Barcelona Graduate School of Economics (Barcelona GSE) ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

David Pérez-Castrillo (Contact Author)

Universidad Autonoma de Barcelona ( email )

Edifici B - Campus Bellaterra
Barcelona, 08193
Spain
(34 93) 381 1405 (Phone)
(34 93) 581 2012 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

David Wettstein

Ben-Gurion University of the Negev ( email )

Economics Department
Beer-Sheva 84105
Israel

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