Legros Computation Nucleolus IJGT 1987

International Journal of Game Theory, Vol. 16, Issue 1, page 1-14

Computation of the Nueleolusof Some Bilateral Market Games

By P. Legros2

Abstract:

This paper gives a simple algorithm for computing the nucleolus of bilateral markets withtwo complementary commodities.IntroductionMaschler, Peleg and Shapley give a geometric characterization of the central place ofthe nucleolus in the imputation space. Their method is related to the algorithm ofKopelowitcz which consists of solving a sequence of linear programs. Papers of Brune,Owen, Kohlberg, Bruynell and Grotte give some general results concerning the proper-ties and the computation of the nucleolus. However, little is known about the evolu-tion of the nucleolus within a given class of games; exceptions are results of Littlechildfor special cost games, of Galil for weighted majority games, and of Driessen and Tijsfor special economic games. The purpose of this paper is to compute the nucleolus ofthe following class of games.We consider the class of cooperative games with side-payments and whose charac-teristic function is,

~S)=IS~PI

^X'IS~QI all

SCPUQ

(1.1)whereP U Q is the set of players^ is the min operator: a ^ b = min (a, b)

x m*.

This is typically a generalization of the well known gloves game (take X = 1). We canconsider for instance that P is a set of manufacturers, each of whom owns a machine,and that Q is a set of workers each willing to work a certain amount of time. Then

v(S)

represents the net profit that the coalition S can get with the output produced by1 This work is part of my doctoral dissertation at Paris XII University (France). Part of the resultswere obtained in 1982--1983 while I was visiting the MEDS Department at Nortwestern university.I gratefully acknowledge the financial support of the Minist6re des Relations Ext~rieures (France).2 Patrick Legros, Universit6 de Paris XII (La Varenne St. Hilaire). Current address: CaliforniaInstitute of Technology, Humanities, Pasadena, CA 91125, USA.0020-7276/87/1/1-14 $2.50 9 1987 Physica-Verlag, Heidelberg

2 P. Legrosthe cooperation of the IS NPI manufacturers and the IS n QI workers, X being atechnical coefficient which illustrates the complementarity between machines andworker-hours. 3 The problem is then to allocate the total profit

v(P W Q)

betweenmanufacturers and workers.The set of imputations is the Set of Pareto optimal and individually rational at-locations;

Iv= {xE~lPUQllxi~O and ~ xi=v(PUO) }

(1.2)

icPU Q

We introduce the following notation and definitions. Capital letters will refer to coali-tions and small letters to numbers. When no confusion is possible we denote s = IS[the number of elements of the coalition S. We do not distinguish between a coalitionand its profile, i.e. we write

T=-(t,a(t))

where t-ITNPI and

a(t) =-

ITNQI. Forevery coalition T, the excess of T with respect to (wrt) the imputation x is the differ-ence v(T) - N

x i

and is denoted either

e(T, x)

or

ex(t, o(t)).iETLet O(x)

be the vector of ~ 2p+q-1 for which the components are the excessesranked in decreasing order. An imputation x is preferred to an imputation y if andp+2 q 14only if (iff)

O(x)

is before

O(y)

in the lexicographic ordering .on IR - . Thenucleolus is the vector which is preferred to every other imputation. Schmeidler provesthat the nucleolus always exists, is unique, is an element of every e-core and is a con-tinuous function of the characteristic function. We denote the nucleolus by

nu.

A vector x in

IRp+q

s.t.

X i

=

0! for all i in P and

x i

= ~ for all j in Q is denoted

((a) p , (~)q) = x.

We denote by

Xp,q

the set of imputations which take this form,

xp, q = {x ~ Iv l x = ((a)P, 03)q) }.

(1.3)2 Preliminary Results

Lemma 2.1: nu E Xp,q.

Proof. Maschler and Peleg prove that symmetric players receive equal payoffs in thekernel. Because the nucleolus is an element of the kernel, the result follows. Q.E.D.

Lemma 2.2: e(T, nu) <<, 0

for all coalitions T.Proof." It suffices to show that the core is nonempty. If X

<,p/q,

consider the vectorx = ((0) p , (x)q). Then

ex(t, of.t)) = t ^

Xcr(t) - Xo(t) for all coalitions

(t, o(t)),

and so

ex(t, e(t)) <, O.

Similarly, if X ~>

p/q,

consider the vector x = ((1) p, (0)q). Then

ex(t, o(t))

= t ,, Xo(t) - t ~< 0. It is in fact possible to show that every subgame also has a non-empty core, i.e. that (1.1) defines a market game. Q.E.D.3 This interpretation is borrowed from Maschler.4 I.e. there exists i 0 such that (s.t.)

Oi(x) = Oi(Y)

for all i < i0 and

Oio(X) < Oio(Y).

Computation of the Nucleolus of Some Bilateral Market Games 3Let (A+, A ) be the following partition of 2 Pu

Q,

A+ = {(t,

o(t))E

[0,p] x [0,

qllt)he(t)}

A _ = {(t, o(t)) E [0, p ] x [0, q ll t < ha(t) }.(2.1)

Lemma 2.3:

The excesses wrt x =

((a) p, ([3) )

are the following(i)

IfX <~p/q, ex(t, o(t))= {pa(t)/q-t}a

if

(t, a(t))

EA+

= {pa(t)/q - t }a + t - ha(t)

if (t, o(t)) E A_.(ii) IfX

>~p/q, ex(t, o(t)) = {po(t)/q - t}~ +

o(t)(X-p/q) if

(t, o(t)) EA+= {po(t)/q -

t}(a- 1) if (t, o(t)) EA_.Proof. For all coalitions

(t, a(t))

and all vectors x = ((a) p, (/3)q),

ex(t, a(t)) = t ^

Xo(t)

-ta-o(t)[3.

Because

q[3 =p ^ Xq-pa,

some simple transformations yield the result.Q.E.D.

Lemma 2.4

P

O) Let X <~p/q.

If there exists

(t, a(t))EA+

s.t.

-o(O-t>O,

then

nu

=((0) p,

(x)q). q

(ii) Let X/>

p/q.

If there exists

(t, o(t)) E A _ s.t. p o(t)

- t < O,

then

nu = ((1)P,

(0) q).

q(iii) Otherwise, the nucleolus is defined by the equality

max

e(S,

x) = max

e(S, x).

S~A + SEA _IS•P]q:p

Proof."

(i) and (ii). A direct consequence of Lemma 2.2.(iii) By Lemma 2.3, it is clear that when a rises, the excesses inA+ andA_ varyin opposite directions. It follows that a must be such that the equality in Lemma 2.4is true. First, it is immediate that (p, q) EA+ and that

ex( p,

q) = 0 for

all x EXp,q.

We can then restrict our attention to coalitions in A+ such that IS fq P I ~< p - 1. Now,suppose that

e(S o, x)>e(To,

x), where So EA+ and T O EA_ and where

e(S o, x)>~e(S, x)

for all S E A+ and

e(To, x) >~ e(T, x)

for all T E A_. By Lemma 2.1, the exces-ses wrt the nucleolus are given by Lemma 2.3. Let y = ((a') p, (/3') q }

E

Xp,q,

where,for an appropriate choice of

a'

> e, we have,

e(S o, x) > e(S o, y) = e(T o, y)

>e(To, x).Precisely, take

a' = a + [e(So, x )-e(To,x)]/[p{a(to)- a(So)}/q- to +

So]. s Thisproves that x cannot be the nucleolus of the game. Q.E.D.5 We check that the RHS of this equality is indeed greater than a (apply the definitions of A_ andA+ and Lemma 2.2).