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Reward Functions And Cooperative Games: Characterization And Economic Application

Author

Listed:
  • JORDI VILASECA

    (Universitat Oberta de Catalunya, Av.Tibidabo 39-43, Barcelona, 08035, Spain)

  • ANTONI MESEGUER

    (Universitat Oberta de Catalunya, Av.Tibidabo 39-43, Barcelona, 08035, Spain)

  • JOAN TORRENT

    (Universitat Oberta de Catalunya, Av.Tibidabo 39-43, Barcelona, 08035, Spain)

  • RAQUEL FERRERAS

    (Universitat Oberta de Catalunya, Av.Tibidabo 39-43, Barcelona, 08035, Spain)

Abstract

In this paper we study network structures in which the possibilities for cooperation are restricted and the benefits of a group of players depend on how these players are internally connected. One way to represent this type of situations is the so-called reward function, which represents the profits obtainable by the total coalition if links can be used to coordinate agents' actions. For any cooperative game, a reward function is associated. Given a reward function, our aim is to analyze under which conditions it is possible to associate a cooperative game to it. We characterize the reward function by means of two conditions, component permanence and component additivity, in order to determine whether there exists or not a cooperative game associated to it. An economic application is shown to illustrate the main theoretical result. Data from Catalan firms is used to compute the reward function on the set of communication networks determined by firms, customers, distributors and suppliers.

Suggested Citation

  • Jordi Vilaseca & Antoni Meseguer & Joan Torrent & Raquel Ferreras, 2008. "Reward Functions And Cooperative Games: Characterization And Economic Application," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 10(02), pages 165-176.
    • Handle: RePEc:wsi:igtrxx:v:10:y:2008:i:02:n:s0219198908001856
    DOI: 10.1142/S0219198908001856
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    More about this item

    Keywords

    Cooperative game; network; reward function; C71;
    All these keywords.

    JEL classification:

    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology
    • C0 - Mathematical and Quantitative Methods - - General
    • C6 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling
    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D5 - Microeconomics - - General Equilibrium and Disequilibrium
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M2 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics

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