Consolidating Marginalism and Egalitarianism: A New Value for Transferable Utility Games

TL;DR

This paper introduces a new value for transferable utility cooperative games that balances marginal productivity and egalitarian fairness, bridging the gap between the Shapley value and equal division.

Contribution

It proposes a novel value that combines the properties of the Shapley value and equal division, with four axiomatic characterizations and a strategic implementation mechanism.

Findings

The new value matches the Shapley value in extreme cases.

It aligns with equal division in other extreme cases.

A strategic implementation mechanism in sub-game perfect equilibrium is developed.

Abstract

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 have also developed a strategic implementation mechanism of our value in sub-game perfect Nash equilibrium.