We consider cooperative games with transferable utility (TU-games), in which we allow for a social structure on the set of players, for instance a hierarchical ordering or a dominance relation.The social structure is utilized to refine the core of the game, being the set of payoffs to the players that cannot be improved upon by any coalition of players.For every coalition the relative strength of a player within that coalition is induced by the social structure and is measured by a power function.We call a payoff vector socially stable if at the collection of coalitions that can attain it, all players have the same power.The socially stable core of the game consists of the core elements that are socially stable.In case the social structure is such that every player in a coalition has the same power, social stability reduces to balancedness and the socially stable core coincides with the core.We show that the socially stable core is non-empty if the game itself is socially stable.In general the socially stable core consists of a finite number of faces of the core and generically consists of a finite number of payoff vectors.Convex TU-games have a non-empty socially stable core, irrespective of the power function.When there is a clear hierarchy of players in terms of power, the socially stable core of a convex TU-game consists of exactly one element, an appropriately defined marginal vector.We demonstrate the usefulness of the concept of the socially stable core by two applications.One application concerns sequencing games and the other one the distribution of water.
|Place of Publication||Tilburg|
|Number of pages||23|
|Publication status||Published - 2004|
|Name||CentER Discussion Paper|
- game theory
- utility theory