Ruhr Economic Papers

Ruhr Economic Papers #326

A New Outside Option Value for Networks: The Kappa-Value – Measuring Distribution of Power of Political Agreements

by Julia Belau

TU Dortmund, RGS Econ, 04/2012, 15 S./p., 8 Euro, ISBN 978-3-86788-375-7 DOI: 10.4419/86788375

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Abstract

In an economic or social situation where agents have to group in order to achieve common goals, how can we calculate the coalitional rents of the agents arising from the coalition formation? Once we have formalized the situation via a TU-game and a network describing the economic structure, we can apply different allocation rules to assign the coalitional rents to the agents. We specifically analyze situations where parties with a specific vote distribution in a parliament have to build agreements in order to reach some required quorum. In this situation, we want to measure the (relative) distribution of power. We analyze the allocation rules called Position value (Meessen (1988) and Borm et al. (1992)) and graph-chi-value (Casajus (2009)). Applying the generalized framework (Gómez et al. (2008)), a framework where coalitions are not established yet, we fi nd that the graph-chi-value does not differ for networks referring to the same coalition while the Position value takes into account the specific role of an agent within the network, i.e. the communication path. We define and characterize a new outside option sensitive value, the Kappa-value, which takes into account both outside options and the role of an agent within the network.

JEL-Classification: C71, D85, H10

Keywords: Cooperative games; graph-restricted games; networks; position value; outside options; minimal winning coalitions

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