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Efficient Bidding with Externalitites

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  • Inés Macho
  • David Pérez-Castrillo
  • David Wettstein

Abstract

We implement a family of efficient proposals to share benefits generated in environments with externalities. These proposals extend the Shapley value to games with externalities and are parametrized through the method by which the externalities are averaged. We construct two slightly different mechanisms: one for environments with negative externalities and the other for positive externalities. We show that the subgame perfect equilibrium outcomes of these mechanisms coincide with the sharing proposals.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 159.

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Date of creation: Feb 2005
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Handle: RePEc:bge:wpaper:159

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Keywords: Implementation; Externalities; Bidding; Shapley Value;

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References

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  1. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
  2. David Pérez-Castrillo & David Wettstein, . "Bidding For The Surplus: A Non-Cooperative Approach To The Shapley Value," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 461.00, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Juan Vidal-Puga, 2003. "Bargaining with commitments," Game Theory and Information, EconWPA 0306002, EconWPA.
  4. Inés Macho-Stadler & David Pérez-Castrillo & David Wettstein, 2004. "Sharing the surplus: A just and efficient proposal for environments with externalities," Working Papers 119, Barcelona Graduate School of Economics.
  5. Bolger, E M, 1989. "A Set of Axioms for a Value for Partition Function Games," International Journal of Game Theory, Springer, Springer, vol. 18(1), pages 37-44.
  6. Perez-Castrillo, D. & Wettstein, D., 1999. "Bidding for the Surplus: a Non-Cooperative Approach to the Shapley Value. ation," Papers, Tel Aviv 24-99, Tel Aviv.
  7. (*), Y. Stephen Chiu & Ani Dasgupta, 1998. "On implementation via demand commitment games," International Journal of Game Theory, Springer, Springer, vol. 27(2), pages 161-189.
  8. Vidal-Puga, Juan & Bergantinos, Gustavo, 2003. "An implementation of the Owen value," Games and Economic Behavior, Elsevier, Elsevier, vol. 44(2), pages 412-427, August.
  9. David P�rez-Castrillo & David Wettstein, 2002. "Choosing Wisely: A Multibidding Approach," American Economic Review, American Economic Association, American Economic Association, vol. 92(5), pages 1577-1587, December.
  10. Winter, Eyal, 1994. "The Demand Commitment Bargaining and Snowballing Cooperation," Economic Theory, Springer, Springer, vol. 4(2), pages 255-73, March.
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Citations

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Cited by:
  1. Yuan Ju & David Wettstein, 2009. "Implementing cooperative solution concepts: a generalized bidding approach," Economic Theory, Springer, Springer, vol. 39(2), pages 307-330, May.
  2. Rene van den Brink & Gerard van der Laan & Nigel Moes, 2012. "A Strategic Implementation of the Average Tree Solution for Cycle-Free Graph Games," Tinbergen Institute Discussion Papers, Tinbergen Institute 12-050/1, Tinbergen Institute.
  3. David Pérez-Castrillo & Nicolas Quérou, 2011. "Smooth Multibidding Mechanisms," CESifo Working Paper Series 3394, CESifo Group Munich.
  4. Effrosyni Diamantoudi & Inés Macho-Stadler & David Pérez-Castrillo & Licun Xue, 2011. "Sharing the surplus in games with externalities within and across issues," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 880.11, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  5. Geoffroy de Clippel & Roberto Serrano, 2007. "Marginal contributions and externalities in the value," Working Papers, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales 2007-04, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  6. Ines Macho-Stadler & David Perez-Castrillo & David Wettstein, 2009. "Dividends and Weighted Values in Games with Externalities," Working Papers, Ben-Gurion University of the Negev, Department of Economics 0906, Ben-Gurion University of the Negev, Department of Economics.
  7. Geoffroy de Clippel & Roberto Serrano, 2008. "Bargaining, coalitions and externalities: A comment on Maskin," Working Papers, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales 2008-11, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.

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