The cooperative facility location game is a cooperative game of cost sharing. The goal is to share the cost of opening new facilities between the clients enjoying these facilities. [1] :386 The game has the following components:
EXAMPLE:
The most socially-desirable outcome of the game is that all agents are served. The cost of this outcome (8 in the above example) can be shared among the agents. A cost-allocation is good if no sub-group of agents can deviate and get a lower cost for itself (such cost-allocation is said to be in the core of the game). In the above example:
A classic result in game-theory, the Bondareva–Shapley theorem, gives necessary and sufficient conditions for a game to have nonempty core.
Pareto efficiency or Pareto optimality is a situation where no individual or preference criterion can be better off without making at least one individual or preference criterion worse off or without any loss thereof. The concept is named after Vilfredo Pareto (1848–1923), Italian civil engineer and economist, who used the concept in his studies of economic efficiency and income distribution. The following three concepts are closely related:
A commitment scheme is a cryptographic primitive that allows one to commit to a chosen value while keeping it hidden to others, with the ability to reveal the committed value later. Commitment schemes are designed so that a party cannot change the value or statement after they have committed to it: that is, commitment schemes are binding. Commitment schemes have important applications in a number of cryptographic protocols including secure coin flipping, zero-knowledge proofs, and secure computation.
In game theory, a cooperative game is a game with competition between groups of players ("coalitions") due to the possibility of external enforcement of cooperative behavior. Those are opposed to non-cooperative games in which there is either no possibility to forge alliances or all agreements need to be self-enforcing.
In cooperative game theory, the core is the set of feasible allocations that cannot be improved upon by a subset of the economy's agents. A coalition is said to improve upon or block a feasible allocation if the members of that coalition are better off under another feasible allocation that is identical to the first except that every member of the coalition has a different consumption bundle that is part of an aggregate consumption bundle that can be constructed from publicly available technology and the initial endowments of each consumer in the coalition.
Adjusted Winner (AW) is a procedure for envy-free item assignment. Given two agents and some goods, it returns a partition of the goods between the agents with the following properties:
In economics, the Edgeworth conjecture is the idea, named after Francis Ysidro Edgeworth, that the core of an economy shrinks to the set of Walrasian equilibria as the number of agents increases to infinity.
Competitive equilibrium is a concept of economic equilibrium introduced by Kenneth Arrow and Gérard Debreu in 1951 appropriate for the analysis of commodity markets with flexible prices and many traders, and serving as the benchmark of efficiency in economic analysis. It relies crucially on the assumption of a competitive environment where each trader decides upon a quantity that is so small compared to the total quantity traded in the market that their individual transactions have no influence on the prices. Competitive markets are an ideal standard by which other market structures are evaluated.
Cognitive hierarchy theory (CHT) is a behavioral model originating in behavioral economics and game theory that attempts to describe human thought processes in strategic games. CHT aims to improve upon the accuracy of predictions made by standard analytic methods, which can deviate considerably from actual experimental outcomes.
Fair item allocation is a kind of a fair division problem in which the items to divide are discrete rather than continuous. The items have to be divided among several partners who value them differently, and each item has to be given as a whole to a single person. This situation arises in various real-life scenarios:
Envy-freeness (EF) is a criterion of fair division. In an envy-free division, every agent feels that their share is at least as good as the share of any other agent, and thus no agent feels envy.
In economics and consumer theory, a linear utility function is a function of the form:
Efficiency and fairness are two major goals of welfare economics. Given a set of resources and a set of agents, the goal is to divide the resources among the agents in a way that is both Pareto efficient (PE) and envy-free (EF). The goal was first defined by David Schmeidler and Menahem Yaari. Later, the existence of such allocations has been proved under various conditions.
Weller's theorem is a theorem in economics. It says that a heterogeneous resource ("cake") can be divided among n partners with different valuations in a way that is both Pareto-efficient (PE) and envy-free (EF). Thus, it is possible to divide a cake fairly without compromising on economic efficiency.
Resource monotonicity is a principle of fair division. It says that, if there are more resources to share, then all agents should be weakly better off; no agent should lose from the increase in resources. The RM principle has been studied in various division problems.
The competitive facility location game is a kind of competitive game in which service-providers select locations to place their facilities in order to maximize their profits. The game has the following components:
A deferred-acceptance auction (DAA) is an auction in which the allocation is chosen by repeatedly rejecting the least attractive bids. It is a truthful mechanism with strategic properties that make it particularly suitable to complex auctions such as the radio spectrum reallocation auction.
In economics and mechanism design, a cost-sharing mechanism is a process by which several agents decide on the scope of a public product or service, and how much each agent should pay for it. Cost-sharing is easy when the marginal cost is constant: in this case, each agent who wants the service just pays its marginal cost. Cost-sharing becomes more interesting when the marginal cost is not constant. With increasing marginal costs, the agents impose a negative externality on each other; with decreasing marginal costs, the agents impose a positive externality on each other. The goal of a cost-sharing mechanism is to divide this externality among the agents.
Fair river sharing is a kind of a fair division problem in which the waters of a river has to be divided among countries located along the river. It differs from other fair division problems in that the resource to be divided - the water - flows in one direction - from upstream countries to downstream countries. To attain any desired division, it may be required to limit the consumption of upstream countries, but this may require to give these countries some monetary compensation.
Random serial dictatorship (RSD), also called: random priority (RP), is a procedure for dividing indivisible items fairly among people.
Rank-maximal (RM) allocation is a rule for fair division of indivisible items. Suppose we have to allocate some items among people. Each person can rank the items from best to worst. The RM rule says that we have to give as many people as possible their best (#1) item. Subject to that, we have to give as many people as possible their next-best (#2) item, and so on.