Compensatory transfers in two-player decision problems
AbstractThis paper presents an axiomatic characterization of a family of solutions to two-player quasi-linear social choice problems. In these problems the players select a single action from a set available to them. They may also transfer money between themselves. The solutions form a one-parameter family, where the parameter is a non-negative number, t . The solutions can be interpreted as follows: Any efficient action can be selected. Based on this action, compute for each player a Ã¢â¬Åbest claim for compensationÃ¢â¬. A claim for compensation is the difference between the value of an alternative action and the selected efficient action, minus a penalty proportional to the extent to which the alternative action is inefficient. The coefficient of proportionality of this penalty is t . The best claim for compensation for a player is the maximum of this computed claim over all possible alternative actions. The solution, at the parameter value t , is to implement the chosen efficient action and make a monetary transfer equal to the average of these two best claims. The characterization relies on three main axioms. The paper presents and justifies these axioms and compares them to related conditions used in other bargaining contexts. In Nash Bargaining Theory, the axioms analogous to these three are in conflict with each other. In contrast, in the quasi-linear social choice setting of this paper, all three conditions can be satisfied simultaneously.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Springer in its journal International Journal of Game Theory.
Volume (Year): 33 (2005)
Issue (Month): 2 (06)
Contact details of provider:
Web page: http://link.springer.de/link/service/journals/00182/index.htm
Other versions of this item:
- Green, Jerry, 2005. "Compensatory Transfers in Two-Player Decision Problems," Scholarly Articles 3204680, Harvard University Department of Economics.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Thomson, William, 1983. "Problems of fair division and the Egalitarian solution," Journal of Economic Theory, Elsevier, vol. 31(2), pages 211-226, December.
- Moulin, Herve, 1985. "The separability axiom and equal-sharing methods," Journal of Economic Theory, Elsevier, vol. 36(1), pages 120-148, June.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Elster, Jon, 1991. "Local justice : How institutions allocate scarce goods and necessary burdens," European Economic Review, Elsevier, vol. 35(2-3), pages 273-291, April.
- Kaneko, Mamoru, 1977. "The ratio equilibrium and a voting game in a public goods economy," Journal of Economic Theory, Elsevier, vol. 16(2), pages 123-136, December.
- Aumann, Robert J. & Maschler, Michael, 1985. "Game theoretic analysis of a bankruptcy problem from the Talmud," Journal of Economic Theory, Elsevier, vol. 36(2), pages 195-213, August.
- Tadenuma, Koichi & Thomson, William, 1993. "The fair allocation of an indivisible good when monetary compensations are possible," Mathematical Social Sciences, Elsevier, vol. 25(2), pages 117-132, February.
- Moulin, Herve, 1985.
"Egalitarianism and Utilitarianism in Quasi-linear Bargaining,"
Econometric Society, vol. 53(1), pages 49-67, January.
- Moulin Herve, 1984. "Egalitarianisme and utilitarianism in quasi-linear bargaining," CEPREMAP Working Papers (Couverture Orange) 8417, CEPREMAP.
- Thomson, A., 1989. "The Consistency Principle," RCER Working Papers 192, University of Rochester - Center for Economic Research (RCER).
- Moulin, Herve, 1989. "Monotonic surplus sharing: Characterization results," Games and Economic Behavior, Elsevier, vol. 1(3), pages 250-274, September.
- de Clippel, Geoffroy & Bejan, Camelia, 2011.
"No profitable decompositions in quasi-linear allocation problems,"
Journal of Economic Theory,
Elsevier, vol. 146(5), pages 1995-2012, September.
- Geoffroy de Clippel & Camelia Bejan, 2009. "No Profitable Decomposition in Quasi-Linear Allocation Problems," Working Papers 2009-6, Brown University, Department of Economics.
- Yuan Ju, 2013. "Efficiency and compromise: a bid-offer–counteroffer mechanism with two players," International Journal of Game Theory, Springer, vol. 42(2), pages 501-520, May.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F Baum).
If references are entirely missing, you can add them using this form.