Sharing the proceeds from a hierarchical venture when agents have needs

TL;DR

This paper introduces need-adjusted revenue sharing rules for hierarchical ventures, ensuring fair distribution considering agents' individual needs and hierarchical structure.

Contribution

It develops a family of need-adjusted geometric rules and a need-adjusted serial rule for equitable revenue distribution in hierarchical organizations.

Findings

Need-adjusted geometric rules distribute net revenue effectively.

Need-adjusted serial rule ensures equal sharing among agents and predecessors.

The rules account for individual needs within hierarchical revenue sharing.

Abstract

We consider a setting in which a set of agents are hierarchically organized for a joint venture. They each generate revenues for the joint venture and have individual needs to cover. The aim is to distribute aggregate revenues appropriately. We characterize a family of need-adjusted geometric rules where the net revenue (after covering needs) "bubbles up" in the hierarchy, as well as a need-adjusted serial rule in which the net revenue is equally shared among each agent and his predecessors in the hierarchy.