Bargaining in Coalitional Games with Externalities

Wednesday 4 June 2014, 1.00PM to 2.00pm

Speaker(s): Ben McQuillin, University of East Anglia

Abstract: The presentation will encompass two related papers (both joint work with R. Sugden): ‘Balance and the Extended, Generalized Shapley Value’, and ‘Backward Induction Foundations of the Shapley Value’. Both papers address the question, in a situation characterised by coalitional surpluses and coalitional externalities: what is the outcome that would be achieved through bargaining between the entities in this situation, if these entities were ideally rational?

In the first paper, we characterise the Extended, Generalized Shapley Value of McQuillin (J Ec Theory 144:696-721, 2009) using an ‘efficiency' condition and two ‘balance' conditions. One feature of this characterisation is that the conditions only impose requirements on the value for a single game: the specific game under consideration.

The second paper is in the spirit of the ‘Nash program', which sees the noncooperative and cooperative approaches as mutually illuminative. We build on the contribution of Gul (1989, 1999). Where Gul describes a noncooperative bargaining process that is infinite, we suppose that the bargaining process is finite. We are then able to draw some sharper conclusions about the relationship between subgame perfect Nash equilibria in the bargaining game and the Shapley value of the underlying cooperative game. The analysis extends readily to encompass underlying games with coalitional externalities.

Location: ARRC Auditorium (A/RC/014)

Admission: All welcome.