Sharing the proceeds from a hierarchical venture

Hougaard, Jens Leth;Moreno-Ternero, Juan de Dios;Tvede, Mich;Osterdal, Lars Peter
(2017) Games and Economic Behavior — Vol. 102, p. 98-110 (2017)

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Authors
  • Hougaard, Jens LethUniversity of Copenhagen
    Author
  • Moreno-Ternero, Juan de DiosUCLouvain
    Author
  • Tvede, MichNewcastle University Business School
    Author
  • Osterdal, Lars PeterCopenhagen Business School
    Author
Abstract
We consider the problem of distributing the proceeds generated from a joint venture in which the participating agents are hierarchically organized. We introduce and characterize a family of allocation rules where revenue ‘bubbles up’ in the hierarchy. The family is flexible enough to accommodate the no-transfer rule (where no revenue bubbles up) and the full-transfer rule (where all the revenues bubble up to the top of the hierarchy). Intermediate rules within the family are reminiscent of popular incentive mechanisms for social mobilization or multi-level marketing.
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Hougaard, J. L., Moreno-Ternero, J. d. D., Tvede, M., & Osterdal, L. P. (2017). Sharing the proceeds from a hierarchical venture. Games and Economic Behavior, 102, 98-110. https://doi.org/10.1016/j.geb.2016.10.016 (Original work published 2017)