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Efficient Bidding with Externalitites

Author

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  • Inés Macho-Stadler
  • 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.

Suggested Citation

  • Inés Macho-Stadler & David Pérez-Castrillo & David Wettstein, 2005. "Efficient Bidding with Externalitites," Working Papers 159, Barcelona School of Economics.
    • Handle: RePEc:bge:wpaper:159
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    References listed on IDEAS

    as
    1. Perez-Castrillo, David & Wettstein, David, 2001. "Bidding for the Surplus : A Non-cooperative Approach to the Shapley Value," Journal of Economic Theory, Elsevier, vol. 100(2), pages 274-294, October.
    2. Vidal-Puga, Juan & Bergantinos, Gustavo, 2003. "An implementation of the Owen value," Games and Economic Behavior, Elsevier, vol. 44(2), pages 412-427, August.
    3. David Pérez-Castrillo & David Wettstein, 2002. "Choosing Wisely: A Multibidding Approach," American Economic Review, American Economic Association, vol. 92(5), pages 1577-1587, December.
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    5. Juan J. Vidal-Puga, 2004. "Bargaining with commitments," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(1), pages 129-144, January.
    6. Winter, Eyal, 1994. "The Demand Commitment Bargaining and Snowballing Cooperation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 4(2), pages 255-273, March.
    7. (*), Y. Stephen Chiu & Ani Dasgupta, 1998. "On implementation via demand commitment games," International Journal of Game Theory, Springer;Game Theory Society, vol. 27(2), pages 161-189.
    8. Inés Macho-Stadler & David Pérez-Castrillo & David Wettstein, 2004. "Sharing the surplus: A just and efficient proposal for environments with externalities," UFAE and IAE Working Papers 611.04, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    9. Francis Bloch, 1995. "Endogenous Structures of Association in Oligopolies," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 537-556, Autumn.
    10. Perez-Castrillo, D. & Wettstein, D., 1999. "Bidding for the Surplus: a Non-Cooperative Approach to the Shapley Value. ation," Papers 24-99, Tel Aviv.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Macho-Stadler, Inés & Pérez-Castrillo, David & Wettstein, David, 2018. "Values for environments with externalities – The average approach," Games and Economic Behavior, Elsevier, vol. 108(C), pages 49-64.
    2. Roberto Serrano, 2020. "Sixty-Seven Years of the Nash Program: Time for Retirement?," Working Papers 2020-20, Brown University, Department of Economics.
    3. Geoffroy de Clippel & Roberto Serrano, 2008. "Bargaining, coalitions and externalities: A comment on Maskin," Working Papers 2008-11, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
    4. van den Brink, René & van der Laan, Gerard & Moes, Nigel, 2013. "A strategic implementation of the Average Tree solution for cycle-free graph games," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2737-2748.
    5. Sun, Chaoran, 2022. "Bidding against a Buyout: Implementing the Shapley value and the equal surplus value," Journal of Mathematical Economics, Elsevier, vol. 101(C).
    6. Ines Macho-Stadler & David Perez-Castrillo & David Wettstein, 2017. "Extensions Of The Shapley Value For Environments With Externalities," Working Papers 1716, Ben-Gurion University of the Negev, Department of Economics.
    7. László Á. Kóczy, 2018. "Partition Function Form Games," Theory and Decision Library C, Springer, number 978-3-319-69841-0, March.
    8. Pérez-Castrillo, David & Quérou, Nicolas, 2012. "Smooth multibidding mechanisms," Games and Economic Behavior, Elsevier, vol. 76(2), pages 420-438.
    9. Geoffroy de Clippel & Roberto Serrano, 2005. "Marginal Contributions and Externalities in the Value," Working Papers 2005-11, Brown University, Department of Economics.
    10. Effrosyni Diamantoudi & Inés Macho-Stadler & David Pérez-Castrillo & Licun Xue, 2015. "Sharing the surplus in games with externalities within and across issues," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 60(2), pages 315-343, October.
    11. Maria Montero, 2023. "Coalition Formation in Games with Externalities," Dynamic Games and Applications, Springer, vol. 13(2), pages 525-548, June.
    12. Geoffroy de Clippel & Roberto Serrano, 2008. "Bargaining, Coalitions and Externalities: a Comment on Maskin," Working Papers 2008-16, Brown University, Department of Economics.
    13. Geoffroy de Clippel & Roberto Serrano, 2008. "Marginal Contributions and Externalities in the Value," Econometrica, Econometric Society, vol. 76(6), pages 1413-1436, November.
    14. Inés Macho-Stadler & David Pérez-Castrillo & David Wettstein, 2010. "Dividends and weighted values in games with externalities," International Journal of Game Theory, Springer;Game Theory Society, vol. 39(1), pages 177-184, March.
    15. Ander Perez-Orive & Andrea Caggese, 2017. "Capital Misallocation and Secular Stagnation," 2017 Meeting Papers 382, Society for Economic Dynamics.
    16. Yuan Ju & David Wettstein, 2009. "Implementing cooperative solution concepts: a generalized bidding approach," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 39(2), pages 307-330, May.
    17. Borm, Peter & Ju, Yuan & Wettstein, David, 2015. "Rational bargaining in games with coalitional externalities," Journal of Economic Theory, Elsevier, vol. 157(C), pages 236-254.
    18. Macho-Stadler, Ines & Perez-Castrillo, David & Wettstein, David, 2007. "Sharing the surplus: An extension of the Shapley value for environments with externalities," Journal of Economic Theory, Elsevier, vol. 135(1), pages 339-356, July.
    19. Roberto Serrano, 2021. "Sixty-seven years of the Nash program: time for retirement?," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 12(1), pages 35-48, March.
    20. Gomes, Armando, 2022. "Coalitional bargaining games: A new concept of value and coalition formation," Games and Economic Behavior, Elsevier, vol. 132(C), pages 463-477.
    21. Sokolov, Denis, 2022. "Shapley value for TU-games with multiple memberships and externalities," Mathematical Social Sciences, Elsevier, vol. 119(C), pages 76-90.

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    More about this item

    Keywords

    Implementation; Externalities; Bidding; shapley value;
    All these keywords.

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games

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