Intrdouction

Cooperative games

• This focuses on predicting which coalitions will form, the joint actions
that groups take and the resulting collective payoffs

• Every player agreed to work together towards a common goal

• Main question is to how much a player should contribute to the coalition

and how much they should benefit from it

• The question is what’s the fair way of a coalition to divide the payoffs.

• Cooperative games has the Shapley value instead of Nash equilibrium

in case of competitive games

• It is the method of dividing gains or costs among each players according

to the value of their contribution

• Marginal Contribution :- What is gained or lost by removing them from

the game
v(N ) − v(N \{i}) = 1 for every i (1)

• Equally contributing players should have equal reward

• Dummy Players have zero value

• Shapley Value
1 X
φi (N, V ) = |S|!(|N | − |S| − 1)![v(S ∪ {i}) − v(S)] (2)
N ! S⊆N \{i}

– The first term shows the division of all possible coalitions that can
be made ( N1 ! )
– The second term shows the all possible value or the weight for the
marginal contribution of i
– This captures the ”marginal contributions” of agent i, averaging
over all the different sequences according to which the grand coali-
tion could be built up

1
– Weight this quantity by the |S|! ways the set S could have been
formed prior i’s addition and by the (|N | − |S| − 1)! ways the
remaining players could be added
– Summing of all possible combination those are before i
– Then taking the average by dividing by |N |!

2
 • Understanding the Shapley value

Table 1: Example of Shapley value

Initial Second Final Marginal of 1

1 12 123 v(1)
1 13 123 v(1)
2 21 123 v(12)-v(2)
2 23 123 v(123)-v(23)
3 13 123 v(13)-v(3)
3 23 123 v(123)-v(23)

One possible combination in airline baggage/freight pricing can be the

three important characteristics in freight i.e. volume, weight ,and piece.
This scenario can be treated as a cooperative model.

Nucleolus