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Rationalizing sharing rules

Author

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  • Flores-Szwagrzak, Karol
  • Østerdal, Lars Peter

Abstract

A partnership can yield a return—a loss or a profit relative to the partners' investments. How should the partners share the return? We identify the sharing rules satisfying classical properties (symmetry, consistency, and continuity) and avoiding arbitrary bounds on a partner's share. We show that any such rule can be rationalized in the sense that its recommendations are aligned with those maximizing a separable welfare function. Among these rules, we characterize those formalizing different notions of proportionality and, in particular, a convenient subclass specified by a single inequality aversion parameter. We also explore when a rule can be rationalized by a more general welfare function. Our central results extend to a wider class of resource allocation problems.

Suggested Citation

  • Flores-Szwagrzak, Karol & Østerdal, Lars Peter, 2025. "Rationalizing sharing rules," Games and Economic Behavior, Elsevier, vol. 154(C), pages 97-118.
    • Handle: RePEc:eee:gamebe:v:154:y:2025:i:c:p:97-118
    DOI: 10.1016/j.geb.2025.08.018
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    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations

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