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Marginal Contributions and Externalities in the Value

Our concern is the extension of the theory of the Shapley value to problems involving externalities. Using the standard axiom systems behind the Shapley value leads to the identification of bounds on players' payoffs around an "externality-free" value. The approach determines the direction and maximum size of Pigouvian-like transfers among players, transfers based on the specific nature of externalities that are compatible with basic normative principles. Examples are provided to illustrate the approach and to draw comparisons with previous literature. Copyright 2008 The Econometric Society.

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Paper provided by Brown University, Department of Economics in its series Working Papers with number 2005-11.

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Date of creation: 2005
Date of revision:
Handle: RePEc:bro:econwp:2005-11
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Department of Economics, Brown University, Providence, RI 02912

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  19. Inés Macho & David Pérez-Castrillo & David Wettstein, 2005. "Efficient Bidding with Externalitites," Working Papers 159, Barcelona Graduate School of Economics.
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