Dynamics of Profit-Sharing Games

An important goal of cooperative game theory is to understand how groups of selfish agents can form coalitions, i.e., work together in teams. In this paper, we study the dynamics of coalition formation under bounded rationality. We consider settings where each team’s profit is given by a convex function, and propose three profitsharing schemes, each of which is based on the concept of marginal utility. The agents are assumed to be myopic, i.e., they keep changing teams as long as they can increase their payoff by doing so. We study the properties (such as closeness to Nash equilibrium or total profit) of the states that result after a polynomial number of such moves, and prove bounds on the price of anarchy and the price of stability of the corresponding games.