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On the accessibility of the core∗

Yi-You Yang† December 8, 2009

Abstract We define a new notion of dominance, sequential z-dominance, and show that for any TU game with a nonempty core, every process of successive blocks must terminate in the core if the notion of sequential z-dominance is employed. Moreover, this result leads to an upper bound for the number of blocks needed to reach the core, which is lower than the one given in K´czy (2006). o JEL classification numbers: C71; C73 Keywords: Core; Bargaining process; dominance; accessibility

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Introduction

The core of a TU (transferable utility) game consists of imputations that cannot be blocked by any coalition of players. This means that the core enjoys a stability property: Once a core imputation is proposed as a solution for the game, no coalition can improve upon it. In case the given initial imputation x does not lie in the core, then a coalition S whose members can do better by forming S may threaten to leave the grand coalition and thereby suggest an alternative imputation y. Again, if y stands outside the core, another blocking coalition could replace y with a third imputation, and so on. The question that arises naturally is whether the process of successive blocks leads to the core. Clearly, the answer to the question depends on which notion of dominance is adopted. By employing weak dominance 1 , Sengupta and Sengupta (1996)
The author is very grateful to three anonymous referees for their perceptive comments of the paper. All remaining errors, of course, are my own. † Department of Mathematics, Aletheia University, 25103, Taipei, Taiwan. E-mail address: yyyang@mail.au.edu.tw 1 A weak dominance is a dominance relation in which not every member of the blocking coalition is strictly better off.

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solve the question in the affirmative by showing that if the core is nonempty. we apply the notion of sequential z-dominance to prove that the core is accessible in a strong sense. On the other hand. Based on the accessibility of the core proved by Sengupta and Sengupta (1996). a lower bound o o 3 can make the algorithm mentioned in the third paragraph of this section more practical: “The existence of a bound is encouraging. As an extension of Sengupta and Sengupta’s (1996) result. While boundedness allows us to define primitive recursive algorithms for the intermediator to design the negotiation process. but it is very likely that the bound can be lowered. blocking coalitions should employ a pre-decided core imputation z as a bench mark and take all former negotiations into consideration such that the blocking imputations chosen at each step of the bargaining process do not make any of the past blocking coalitions worse off. This result strengthens the accessibility of the core and naturally provides an upper bound for the number of blocks required to reach the core. namely.59) points out.3 and 3. Finally. Section 2 introduces relevant definitions and notations.5 in K´czy (2006. K´czy shows that the core can be reached o via a bounded sequence of blocks and proposes an algorithm for generating such a sequence. sequential z-dominance. o K´czy’s bound is not explicitly described. every sequence of successive blocks surely leads to the core in a bounded number of steps. 3 See the proof of Theorem 3.64). Theorem 3. we study the number of steps needed to reach the core in Section 4. such an accessibility property of the core may not hold with strict dominance. p. K´czy (2006) addresses the issue of estimating the number of blocks o needed to reach the core. An active coalition is a proper subset of the grand coalition that can guarantee each of its members a payoff which is strictly individually rational. while our bound can be described o as the number of active coalitions 2 . much lower bounds are required to make the algorithms practical. p. Second. the execution of a certain algorithm will generate a finite sequence of successively dominating imputations that terminates in the core. In Section 3. o 2 2 . which suggests that when contemplating counterproposals. In the present paper.5) results in two respects. our bound is much lower than the one provided by K´czy. we study the accessibility of the core by adopting an alternative notion of dominance. First. which refines K´czy’s (2006.” The paper is organized as follows. As K´czy (2006. we prove that when the notion of sequential z-dominance is employed.

if x (S) = v (S) > y (S) and xS ≥ y S . . x (S) is a shorthand for xi i∈S and let xS denote the projection of x on S. . y ∈ RN . A payoff vector is an imputation if it is individually rational and efficient. For any coalition S. For any pair of vectors x. n} represents the set of players and v is a real-valued function defined on 2N satisfying v (∅) = 0. we o call the transition from y to x a block and interpret it in a dynamic way as follows: Consider a payoff vector y proposed as a solution for the game. let v (S) = v (N )−v (N \S) denote its complementary ¯ ∗ value and let v = (v({1}). We say that x dominates y via S. .2 Preliminaries A transferable utility game (henceforth a game) is a pair (N. v) denote the number of active coalitions. . v) and let S be a coalition. . xn ) ∈ RN . where N = {1. A payoff vector x ∈ RN is said to be individually rational if xi ≥ v ({i}) for every player i in N and efficient if x (N ) = v (N ). . . v) is defined by C (N. v). . Let ζ (N. Following K´czy (2006). S) ≤ 0 for all S ⊂ N } . One way to tackle the issue is to pre-decide a payoff vector z as a bench mark and require that an “acceptable” counterproposal x should satisfy xN \S ≥ z N \S . o 3 . For any vector x = (x1 . If some coalition S can improve upon y. 2007). has been introduced and studied by K´czy and Lauwers (2004. we write xS ≥ y S if xi ≥ y i for each i ∈ S. 2. . v). v) = {x ∈ X (N. The core of a game (N. . A coalition S N is said to be active if v (S) > v ∗ (S). . it seems unrealistic that the blocking coalition S owns such a strong power that it can determine the payoffs of the remaining players arbitrarily. the excess of a coalition S is defined to be e (x. known as the outsider independent dominance. . However. v) the set of imputations of a game (N. v({n})) denote the vector of stand alone values. denoted by x S y. In that case we refer to S as a blocking coalition. Given an imputation x ∈ X (N. it may threaten to leave the grand coalition and thereby suggest an alternative proposal x to replace y. v). v) : e (x. y ∈ X (N. Let x. S) = v (S) − x (S) which can be considered as a measure of the dissatisfaction of coalition S with respect to the imputation x.4 4 A similar restriction of the dominance relation. A coalition is a nonempty subset of N . We denote by X (N. in order to obtain a higher aggregate payoff.

We say that an imputation x is accessible from an imputation y if there exist a sequence of imputations {xj }l and a sequence of coalitions {Sj }l j=0 j=1 such that x = xl . Combining individual rationality. it is possible that another coalition would propose an imputation that upsets S at some later step. feasibility and the myopic behavior of the players. Sj = {1. In that case the bargaining process fails to produce a constructive result. In that case we call the sequence of successive blocks xl Sl xl−1 Sl−1 ··· S1 x0 (1) a dominating sequence of length l and interpret it as a bargaining process among the players. . . 1 − 1 . In other words. Following the analysis. the process stops if and only if the proposal under consideration lies in the core. 2. and xj Sj xj−1 for j = 1. y = x0 . We say that x dominates y via a coalition S with respect to z (x z-dominates y via S for short) if x S y and xN \S ≥ z N \S . . Thus. j j j j Sj = {2. 3} if j is odd and xj = 2. Let z = (2. l. the unique core imputation. The process will come to an end if the last proposal cannot be improved upon by any coalitions. let xj = 3 + 1 . v). 2). . an alternative notion of dominance is formulated as follows. in case v (S) > z (S) for some coalition S. a candidate z for a bench mark should be an imputation. . Moreover. 1 − 1 . Definition 1 Let x and y be imputations of a game (N. . Moreover. the sequence (1) is called a z-dominating sequence if z is a core imputation and xj z-dominates xj−1 via Sj for j = 1. each pair gets 4 and the grand coalition obtains 6. Note that the bargaining may proceed in a roundabout way: Even if a coalition S makes a counterproposal at some step. 2. An example is as follows. 4 . . we argue that a proper bench mark should be a core imputation. the employment of such a bench mark z will deprive coalition S of the chance to make a proposal since there is no imputation x satisfying x (S) = v (S) and xN \S ≥ z N \S simultaneously. Example 2 Consider the three-player game in which each singleton has value zero. 3} if j is even. S might become a blocking coalition twice or even more times in the process.Now we consider what the qualifications should be for such a bench mark. 3 + 1 . v) and let z ∈ C (N. . In order to prevent this situation. and for each positive integer j. l. Then the z-dominating sequence xl Sl xl−1 Sl−1 · · · S2 x1 would never terminate in the core even if l tends to infinity.

we formulate a restrictive notion of dominance as follows. / there exists x ∈ Θ such that x is accessible from y. we shall answer it in the affirmative. 0) has been established. 5 . . Combining with the notion of z-dominance.5 This means that the adoption of sequential z-dominance would force the bargaining to proceed more efficiently and to generate a dominating sequence of length less than or equal to the number of active coalitions. 7/2. 2. 3 The accessibility of the core A set Θ of imputations is said to be accessible if for any imputation y ∈ Θ. Definition 3 Given a core imputation z and a z-dominating sequence of the form (1). . 3} must issue an allocation satisfying the condition (2). 1/2) {2. a blocking coalition should take all former negotiations into consideration and thereby proposes a new payoff allocation that does not make any of the past blocking coalitions worse off. then the unique core imputation z = (2. . In order to provide a dynamic foundation for the core. 2. In the next section. Consider the game given in Example 2 and assume that the z-dominating sequence (2.One way to avoid this kind of inefficiency is to suggest that at each step in the bargaining process. N \S xl+1 (Sj ) ≥ v (Sj ) and xl+1 j ≥ z N \Sj .3} (4. Sengupta and Sengupta (1996) shows that the core is accessible by proposing an algorithm that defines a finite sequence of successive blocks from any non-core imputation to the core. l. 2) is the only choice. (2) It is not difficult to observe that in case the notion of sequential zdominance is applied at each step of a z-dominating sequence. We summarize their algorithm (henceforth S-S-algorithm) in the following: 5 See the proof of Lemma 6 (b) in Section 3. we say that an imputation xl+1 sequentially z-dominates xl via a coalition Sl+1 if xl+1 z-dominates xl via Sl+1 and it keeps all the former blocking coalitions and their complements satisfied in the sense that for j = 1. If the blocking coalition {1. An example may be helpful to see the impact of the notion of sequential z-dominance. the blocking coalitions at each step of the process must be distinct. . The question is whether such a sequence does terminate in the core.

Remark 4 Note that for any core imputation z and for any coalition S. the accessibility of the core is obtained by proving that the S-S-algorithm will not go in an infinite loop. Else take the next integer k + 1. In Sengupta and Sengupta (1996). v) exit loop. Step 3. For each positive integer k do the following loop: (i) Choose a coalition Sk that maximizes the excess with respect to xk−1 .S )  xk−1 + k−1| k . the core is accessible from any imputation via a z-dominating sequence. Step 2. |Tk   i xk−1 .   i z + v (N ) − v (Sk ) − z (N \Sk ) . i ∈ (N \Sk ) and i = ik . Output: A dominating sequence of finite length that terminates in the core. Regarding the S-S-algorithm. Pick a core imputation z. where Tk = i ∈ Sk : xi < z i . Stop. k−1 (iii) Define the imputation xk by  i e(x . In order to provide a solid foundation for the accessibility of the core. This means that the notion of z-dominance is implicitly employed by Sengupta and Sengupta and the S-S-algorithm actually shows that for any arbitrary core imputation z. / Step 1. 6 . i = ik . there are two features concern us. Second.Input: A game (N. i ∈ (Sk \Tk ) . v). we shall show that the process of successive blocks must terminate in the core if a core imputation z is chosen as a bench mark and the blocking coalitions offer counter proposals that sequentially z-dominate preceding ones at each step of the process. xi = k  zi. the form of proposals offered at each step is very rigid. v) with a nonempty core and an initial imputation x0 ∈ C (N. we have v (N ) − v (S) − z (N \S) = z (S) − v (S) ≥ 0. First. These restrictions cast a shadow on the possibility of convincing players to execute the S-S-algorithm in an actual bargaining situation. k−1 (iv) If xk ∈ C (N. (ii) Choose a player ik ∈ N \Sk such that xik = z ik . if if if if i ∈ Tk . only the coalitions with the highest excess are allowed to make counterproposals.

j=1 Sj j=1 Sj . this is impossible. j=1 z(Sl+1 )−v(Sl+1 ) ( ∩ Sj )\Sl+1 j=1 l l . l. Then ( j=1 Sj )\Sl+1 = ∅ and we define the imputation xl+1 by   xi +  l        i  x. if i ∈ ( ∩ Sj )\Sl+1 . . j=1 l (3) if i ∈ N \(( ∩ Sj ) j=1 l Sl+1 ). Then for / any coalition Sl+1 with v (Sl+1 ) > xl (Sl+1 ). (a) Since xl sequentially z-dominates xl−1 .Theorem 5 Consider a game with a nonempty core. v) and let xl be a z-dominating sequence.  v(Sl+1 )−xl (Sl+1 ) l+1 j=1 ∩ Sj . there exists an imputation xl+1 that sequentially z-dominates xl via Sl+1 . Indeed. Lemma 6 Let z be a core imputation of a game (N. if i ∈ ∩ Sj . l+1 Let Sl+1 be a coalition with v (Sl+1 ) > xl (Sl+1 ). Proof. (b) If l ≥ 2 and xj sequentially z-dominates xj−1 via Sj for j = 1.e. The process of successive blocks must converge to a core imputation in a bounded number of steps if the notion of sequential z-dominance is adopted. 7 . if j=1 Sj = ∅ then Sl+1 ⊆ N \( j=1 Sj ) and hence v (Sl+1 ) > xl (Sl+1 ) ≥ z (Sl+1 ) by the fact (ii). j=1 l Sj is a proper subset of j=1 Sj .. (a) If xl ∈ C (N. . v) and xl sequentially z-dominates xl−1 via Sl . v). . j=1 l+1 xi = l+1 if i ∈ Sl+1 \( ∩ Sj ). l+1 l l+1 l Case I. We consider two cases. The proof of Theorem 5 proceeds via the following lemma. Since z ∈ C (N. we have (i) xl (Sj ) ≥ v (Sj ) for 1 ≤ j ≤ l. and (ii) xi ≥ z i for each i ∈ l l l Sl xl−1 Sl−1 ··· S1 x0 (N \Sj ) = N \( j=1 j=1 Sj ). Then Sj = Sk for 1 ≤ j < k ≤ l. then we have j=1 l+1 l Sj = ∅.  l  zi +         i  z. . i.

l+1 l Case II. In case j=1 l Sj j=1 l+1 Sj . l+1 l In case j=1 Sj = j=1 Sj . by (ii) and (3). l (4) z(Sl+1 )−v(S where 1 > tl+1 = z(Sl+1 )−xl (Sl+1 )) ≥ 0. l. j=1 j=1 j=1 j=1 l l l l This implies xl+1 (Sk ) = xl+1 (Sk \(( ∩ Sj ) ∪ Sl+1 )) + xl+1 ( ∩ Sj ) + xl+1 ((Sk ∩ Sl+1 ) \( ∩ Sj )) j=1 j=1 j=1 l l l = z(Sk \(( ∩ Sj ) ∪ Sl+1 )) + xl+1 ( ∩ Sj ) + xl ((Sk ∩ Sl+1 ) \( ∩ Sj )) j=1 j=1 j=1 l l l ≥ xl ( ∩ Sj ) + xl (Sk \(( ∩ Sj ) ∪ Sl+1 )) + xl ((Sk ∩ Sl+1 ) \( ∩ Sj )) j=1 j=1 j=1 l l l = xl (Sk ) ≥ v (Sk ) . it remains to show that j=1 l xl+1 (Sk ) ≥ v (Sk ) for k = 1. xl+1 Sl+1 xl and xi ≥ l+1 z i for all i ∈ l+1 l+1 (N \Sj ). Let 1 ≤ k ≤ l. we have xl N \Sl+1 ≥ xl+1 l+1 and (5) N \S hence xl (N \Sl+1 ) − xl+1 (N \Sl+1 ) ≥ xl (Sk \Sl+1 ) − xl+1 (Sk \Sl+1 ) . j=1 j=1 j=1 Hence. j=1 Sj = j=1 Sj . . for both cases. l+1 It is not difficult to check that. To complete the proof.  l  j=1   i z + tl+1 · (xi − z i ) . by (ii) and (4). j=1 l l  xi . we have l xl+1 ( ∩ Sj ) = xl ( ∩ Sj ) − xl (Sl+1 ) + z(( ∩ Sj ) ∪ Sl+1 ) j=1 j=1 l j=1 = xl ( ∩ Sj ) − xl (( ∩ Sj ) ∪ Sl+1 ) + z(( ∩ Sj ) ∪ Sl+1 ) j=1 l j=1 j=1 l l = xl ( ∩ Sj ) + xl (N \(( ∩ Sj ) ∪ Sl+1 )) − z(N \(( ∩ Sj ) ∪ Sl+1 )) j=1 l j=1 l j=1 l l l ≥ xl ( ∩ Sj ) + xl (Sk \(( ∩ Sj ) ∪ Sl+1 )) − z(Sk \(( ∩ Sj ) ∪ Sl+1 )). if i ∈ Sl+1 \( ∩ Sj ). if i ∈ N \Sl+1 . . 8 . . We define the imputation xl+1 by v(Sl+1 )−xl (Sl+1 ) j=1 xi l+1 =   xi +  l    ∩ Sj l . if i ∈ ∩ Sj . . z(Sk \(( ∩ Sj ) ∪ Sl+1 )) + xl+1 ( ∩ Sj ) ≥ xl ( ∩ Sj ) + xl (Sk \(( ∩ Sj ) ∪ Sl+1 )).

. In case xl ∈ C (N. This implies that for any coalition S1 with v (S1 ) > x0 (S1 ). . we have v (Sk ) > xk−1 (Sk ) and v (Sk−1 ) = xk−1 (Sk−1 ) and hence Sj = Sk−1 = Sk . Thus. v). (4) also implies xl+1 (N \Sl+1 ) = v (N ) − v (Sl+1 ) . Assume that a non-core imputation x0 is proposed. we obtain the desire result. v). any coalition Sl+1 / with v (Sl+1 ) > xl (Sl+1 ) can offer an imputation xl+1 that sequentially zdominates xl . Since xk Sk xk−1 and xk−1 Sk−1 xk−2 . Since xk Sk xk−1 and xk−1 sequentially z-dominates xk−2 . Since z ∈ C (N. (b) We consider two cases. . Combining (5) and (6). Inductively. Combining Lemma 6 (b) and the fact that the number of active coalitions is finite. the process must come to an end in a bounded number of steps. j < k − 1.Moreover. we obtain that for any coalition S. Now we are ready to prove Theorem 5. it follows that v (Sk ) > xk−1 (Sk ) and xk−1 (Sj ) ≥ v (Sj ). xj sequentially z-dominates xj−1 via Sj . Case II. v) augmented with a core imputation z as a bench mark. 9 . By Lemma 6 (a). we obtain xl+1 (Sk \Sl+1 ) ≥ xl (Sk \Sl+1 ) − v (Sl+1 ) + xl (Sl+1 ) and hence xl+1 (Sk ) = xl+1 (Sk \Sl+1 ) + xl+1 ((Sk ∩ Sl+1 )\( ∩ Sj )) + xl+1 ( ∩ Sj ) j=1 j=1 l l (6) ≥ [xl (Sk \Sl+1 ) − v (Sl+1 ) + xl (Sl+1 )] + xl ((Sk ∩ Sl+1 )\( ∩ Sj )) j=1 l +[xl ( ∩ Sj ) + v (Sl+1 ) − xl (Sl+1 )] j=1 l = xl (Sk \Sl+1 ) + xl ((Sk ∩ Sl+1 )\( ∩ Sj )) + xl ( ∩ Sj ) j=1 j=1 l l = xl (Sk ) ≥ v (Sk ) . This also implies Sj = Sk . j = k − 1. l. v) such that x1 z-dominates x0 via S1 . Case I. suppose that the z-dominating sequence xl Sl xl−1 Sl−1 ··· S1 x0 has been established such that for j = 1. there exists x1 ∈ X (N. v (N ) ≥ v (S) + z (N \S). . Consider a game (N.

we obtain an alternative bound. there exists a core imputation which is accessible from x via a dominating sequence of length at most ζ (N. the bound is not explicitly described. and all partitions TC of TC : v (TF ) + S∈TC v (S) + v ∗ (TS ) + x (TI ) ≥ v (T ) ¯ v (S) + v ∗ (TS ) + y (TI ) ≥ v (T ) . it is not difficult to see that the number of active coalitions is much lower than λ (N. can this bound be lowered? Consider the three-player game (N. We summarize a K´czy’s result in the o following. v) with a nonempty core. Theorem 8 Let (N. TC . o However. For any game (N. TS . For any non-core imputation x. v) such that for any non-core imputation x. TI } of T with TI = ∅. However.3) Let (N. v (S) = 0. v) . Imputations x and y are similar if for any coalition T and for all partitions {TF . ¯ S∈TC if and only if v (TF ) + This implies that for any coalition T and for any two similar imputations x and y. Combining Theorem 5 and Lemma 6 (b). v) be a game with a o nonempty core. K´czy defines a classification of imputations as o follows. v). v). v) denote the number of similarity classes. 3}) = 2. 3}) = v ({1. otherwise. 10 . 2006. there exists a core imputation which is accessible from x via a dominating sequence of length at most M . 2. v) be a game with a nonempty core. Given a game (N. v) given by v ({1. v) is a lower bound than the one M proposed by K´czy (2006).4 The number of blocks needed to reach the core Following Sengupta and Sengupta (1996). x (T ) ≥ v (T ) if and only if y (T ) ≥ v (T ) (7) Let λ (N. Theorem 7 (K´czy. namely. K´czy (2006) also shows that the o accessibility of the core can be met in a bounded number of blocks. by (7). ζ (N. Theorem 3. Hence. the number of active coalitions. 2}) = v ({1. Then there exists a positive integer M ≥ λ (N.

On the other hand. 48. Math. Lauwers. 2007. 277-298. [4] Sengupta. o Games Econ. 43. Behav. v) is exactly equal to the number of blocks needed to get from the imputation (0. Lauwers. 61. L. 1996.. Behav. 1.. 56-64. 1) to the unique core imputation (2. 2004. A. 266-273.. L. Econ.. 86-93. 0. ´ [2] K´czy. Games Econ. L. J. L. The coalition structure core is accessible. observe that the core of the game given in Example 2 can be reached from any non-core imputation through a dominating sequence of length at most two. Sengupta. Games Econ. Behav...A. L. A property of the core. K. 0). 11 . The core can be accessed with a bounded number of o blocks.. The minimal dominant set is a non-empty o core-extension.It can be verified that ζ (N.A. References ´ [1] K´czy.A. 2006. The observation indicates that it remains an interesting issue to find better bounds. 12. while the number of active coalitions is three. ´ [3] K´czy.