Cooperative games with types, outside options, and the egalitarian value

Abstract

This article introduces a new axiom of sub-game order preservation for TU-games as well as a model of cooperative games with types. The axiom, alongside efficiency, characterizes the egalitarian value. The model addresses situations where players of different types are needed. Each player has a specific type and coalitions are feasible only if it contains at most one player of each type. We use the new characterization of the egalitarian value for TU-games to obtain the following result in our class of problems: the egalitarian value is the only sharing rule that ensures that each player of the most productive group is better off joining this most productive group. We characterize the egalitarian value without fairness requirement and show that, for this new class of problems, egalitarianism can provide some form of incentives towards optimal cooperation.