Journal of Applied Mathematics

Volume 2012, Article ID 379848, 12 pages

http://dx.doi.org/10.1155/2012/379848

## The Core and Nucleolus in a Model of Information Transferal

Department of Applied Mathematics, University of Twente, P.O. Box 217, 7500 AE Enschede, The Netherlands

Received 29 May 2012; Accepted 28 August 2012

Academic Editor: Marco H. Terra

Copyright © 2012 Dongshuang Hou and Theo Driessen. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

#### Abstract

Galdeano et al. introduced the so-called information market game involving *n* identical firms acquiring a new technology owned by an innovator. For this specific cooperative game, the nucleolus is determined through a characterization of the symmetrical part of the core. The nonemptiness of the (symmetrical) core is shown to be equivalent to one of each, super additivity, zero-monotonicity, or monotonicity.

#### 1. Introduction of the Information Market Game

Consider the following problem [1]. Besides firms with identical characteristics, there exists an agent called the innovator, having relevant information for the firms. The innovator is not going to use the information for himself, but this information can be sold to the firms. Any firm that decides to acquire the new information (e.g., a new technology) is supposed to make use of the information. The potential users of the information are the same before and after the innovator offers the new technology. The firms acquiring the information will be better than before obtaining it, while their utilities are computed under a conservator point of view, assuming that for any uninformed firm, the probability of making the right decision can be described by a *binomial probability distribution*, being the uniform probability of having success. The probability that among firms take the right decision is given by , and hence, the *expected aggregated utility* of firms having success is given by . Here represents the utility if firms make a right decision. Throughout the paper, the utility function is monotonic decreasing because when the number of firms taking the right decision increases, each firm receives a lower utility level, that is, for all (not necessarily normalized in that ).

This information trading problem has been modeled by Galdeano et al. [1] as a cooperative game in characteristic function form, where the set of firms consists of the innovator , having new information, and the users , who could be willing to buy the new information. Throughout the paper, the size (or cardinality) of any coalition is denoted by . In case coalition contains the innovator, then its worth in the so-called information market game equals because any member of , different from the innovator, took the right decision rewarding the expected utility since the uninformed firms outside are assumed to take right decisions too.

*Definition 1.1. *The -person information market game in characteristic function form is given by and on the one hand (cf. [1]),
If the innovator is not a member of coalition , each one of successful users rewards an expected utility the amount of by assumption of the uninformed users outside taking the right decisions. Particularly, the information market game satisfies , and for all , . Furthermore, , for all , , whereas . Consequently, the *marginal contributions *, , are given by for all , , whereas . It is left to the reader to verify
The case yields for all and so, it concerns the inessential (additive) game corresponding with the vector . The case yields zero worth to all coalitions not containing the innovator and so, it concerns the so-called big boss game [2] (with the innovator acting as the big boss). We summarize the main result(s) of Galdeano et al. [1].

Theorem 1.2. *For the -person information market game of the form (1.1)-(1.2), the following three statements are equivalent.*(i)*Zero-monotonicity, that is,
*(ii)* for all ,*(iii)*(cf. [1, Theorem 2, page 25])
*

Besides their study of zero-monotonicity, Galdeano et al. determine the Shapley value of the information market game (cf. Theorem 4, page 27) and compare the Shapley value with the equilibrium outcome (cf. Theorem 7, page 29) in the noncooperative model analyzed by [3]. The main goal of the current paper is to determine the nucleolus of the information market game and for that purpose, we explore and characterize the symmetrical part of the core, provided nonemptiness of the core.

#### 2. Properties of the Information Market Game

This section reports properties of the characteristic function for the information market game. In fact, we claim the equivalence of three game properties (called super-additivity, zero-monotonicity, and monotonicity). The proof of their equivalence is based on the monotonic increasing average profit function for coalitions not containing the innovator, that is, for all . This significant property has not been discovered before and allows us to report an equivalence theorem, which sharpens the previous Theorem 1.2.

*Definition 2.1. *Generally speaking, a cooperative game in characteristic function form is said to be *super-additive, zero-monotonic, and monotonic,* respectively, if its characteristic function satisfies and(i) for all with (super-additivity).(ii) for all and all (zero-monotonicity).(iii) for all with (monotonicity).

Theorem 2.2. *For the -person information market game of the form (1.1)-(1.2), the following four statements are equivalent:
**
Obviously, super-additivity implies zero-monotonicity and in turn, zero-monotonicity implies monotonicity (for nonnegative games). The proof of the Equivalence Theorem 2.2 will be based on the fundamental lemma concerning the monotonicity of averaging the profit function of the form (1.2).*

Lemma 2.3. *The average function given by satisfies*(i)* for all ,*(ii)* for all with .*

*Proof of Lemma 2.3. *Let . Concerning the case , note that as well as and so, the inequality holds due to the fact . Generally speaking, the proof is based on the combinatorial relationship for all and proceeds as follows:
where the relevant inequality holds because the monotonic decreasing sequence satisfies for all . This proves part (i). Concerning part (ii), suppose without loss of generality, with . By applying part (i) twice, we obtain

*Proof of Theorem 2.2. *The super-additivity condition for disjoint, nonempty coalitions (not containing the innovator ) reduces to , whose inequality holds by Lemma 2.3(ii). For disjoint, nonempty coalitions with , , it holds that and so, the corresponding super-additivity condition reduces to or equivalently, for all . By Lemma 2.3(i), it is necessary and sufficient that . This proves the equivalence super-additivity .

The zero-monotonicity condition for coalitions containing the innovator is redundant (since ). Among coalitions not containing the innovator, the zero-monotonicity condition reduces to either , whose inequality holds by Lemma 2.3(ii), or . As before, it is necessary and sufficient that .

Finally, note that the monotonicity condition requires for all , , or equivalently, for all .

#### 3. The Core of the Information Market Game

Generally speaking, marginal contributions of players are well known as upper bounds for pay-offs according to core allocations, that is, for all and all . Throughout the paper, given a pay-off vector and a coalition , we denote , where . The core allocations are selected through *efficiency and group rationality*. The core, however, is a set-valued solution concept, which fails to satisfy the symmetry property in that users of the same type receive identical pay-offs according to core allocations. In order to determine the single-valued solution concept called nucleolus [4], being some symmetrical core allocation, our main goal is to investigate the symmetrical part of the core.

*Definition 3.1. *(i)

(ii) The symmetrical core allocations require equal pay-offs to users, that is,

Lemma 3.2. *
(i) Any game with a nonempty core, , satisfies for all .**
(ii) In case , the core of the information market game is a singleton such that .**
(iii) In case , if the information market game possesses a nonempty core, then , or equivalently, .**
(iv) If satisfies as well as for all , , then the core constraints are redundant for all coalitions with .*

*Proof . *(i) Choose if core is nonempty. Clearly, by (3.1), for all ,

(ii) In case , then the core-constraints reduce to and so, for all , and all , . Consequently, by efficiency, . The resulting vector does indeed satisfy all the core constraints.

(iii) In case , apply part (i) to the information market game to conclude that and so, , or equivalently, .

(iv) Under the given circumstances, , together with (1.3), we derive the following:

Theorem 3.3. *For the -person information market game of the form (1.1)-(1.2) with , the following five statements are equivalent.*(i)*The core is non-empty, .*(ii)*The symmetrical core is non-empty, .*(iii)*.*(iv)*.*(v)*.*

The implication is due to Lemma 3.2(iii). Notice the equivalences as well as . The implication is trivial. It remains to show the implication , the proof of which will be postponed till Section 4.

*Remark 3.4. *The significant condition is equivalent to , where the function is defined by
Note that is treated as a variable and that the function satisfies . It is known that any function of the form is monotonic increasing on the interval and monotonic decreasing on the interval such that its maximum is attained by at level . In our framework, the function is composed as the sum of functions, each of one is monotonic increasing on the subinterval and monotonic decreasing on the subinterval such that its maximum value equals . On the final interval , all the components are monotonic decreasing, except for the very last component given by . Further investigation about the graph of the function is desirable.

#### 4. The Nucleolus of the Information Market Game

A direct consequence of Lemma 3.2(iv) and Lemma 2.3(i) is the following characterization of the symmetrical part of the core.

Corollary 4.1. *
(i) A symmetrical pay-off vector of the form is a core allocation if and only if and for all , or equivalently,
**
(ii) A symmetrical pay-off vector
**
where
*

*Definition 4.2. *(i) Define the excess of coalition , , at pay-off vector in any cooperative game by . Notice that all the excesses of coalitions at core allocations are nonpositive.

(ii) The *excess vector * at pay-off vector in any -person game has as its coordinates the excesses , , , arranged in nonincreasing order.

(iii) The nucleolus [4] of a cooperative game is the unique pay-off vector of which the excess vector satisfies the lexicographic order for any pay-off vector satisfying efficiency and individual rationality (i.e., and for all ).

(iv) The surplus of a player over another player at pay-off vector in any cooperative game is given by the maximal excess among coalitions containing player , but not containing player . That is,
For the purpose of the determination of the nucleolus of the information market game, the next lemma reports the maximal excess levels at symmetrical pay-off vectors .

Lemma 4.3. *For the -person information market game of the form (1.1)-(1.2), it holds that:*(i)* for all with . In case , then the maximal excess among nontrivial coalitions containing player equals attained at -person coalitions of the form , ,*(ii)* for all , , with . In case , there is no general conclusion about the maximal excess among coalitions not containing player .*

*Proof . *(i) For all with , it holds that
Under the additional assumption , we obtain , that is, the maximum is attained for -person coalitions of the form , , (provided ). On the other, for all , , with , it holds .

Theorem 4.4. *Suppose that the symmetrical core of the -person information market game is nonempty, that is, . Let be a maximizer in that
**
Let and .*(i)*Then the pay-off vector belongs to the symmetrical core in that .*(ii)*The nucleolus of the -person information market game equals .*

*Proof . *Suppose . The following equivalences hold:
By Lemma 2.3(i), the latter inequality holds since . So, on the one hand, . On the other, from (4.6) applied to as well as the assumption , it follows that:
(ii) From part (i) and Lemma 4.3(i), on the one hand, we derive the following:
where the latter equality is due to the choice of . The equality for suffices to conclude that the nucleolus is given by . Notice that represents the maximal bargaining range within the core by transferring money from player to player starting at core allocation while remaining in the core. By Lemma 3.2(iv), recall the redundancy of core constraints induced by coalitions containing player 1, so no lower bound for core allocations to player .

If the worth of any coalition not containing player is zero (for instance, the big boss games), that is, for all , then Theorem 4.4 applies with , , yielding the nucleolus to simplify to . Thus, the nucleolus pay-off to the big boss equals the aggregate pay-off to all the users.

*Remark 4.5. *Concerning the case .

Recall that as well as for all , . Thus, the case yields for all , . In other words, in this setting, the nucleolus coincides with the center of gravity of vectors given by , . Here and is the th standard vector in . Note that, for any , the underlying condition may be rewritten as

*Remark 4.6. *Inspired by the description of the nucleolus as given in Remark 4.5, we review a specific subclass of cooperative games with a similar conclusion concerning the nucleolus. A cooperative game is said to be 1*-convex* if and its corresponding *gap function * attains its minimum at the grand coalition , that is, for every coalition , ,
For -convex games, its nucleolus agrees with the center of gravity of the core, of which the extreme points are given by , [5].

The -person information market game satisfies for all , , and so, its gap function is given by for all with and otherwise. Consequently, the -person information market game of the form (1.1)-(1.2) satisfies -convexity if and only if any slope , , is bounded from below by the utility in that , together with (provided ). Observe that the latter condition, together with Lemma 2.3(i), implies the validity of (4.10) with reference to the case of Theorem 4.4. To conclude, the -convexity property for -person information market games is part of the case and the current procedure for the determination of the nucleolus agrees with the known approach being the center of gravity of the non-empty core.

*Remark 4.7. *A cooperative game is said to be 2*-convex *[5] if , and its corresponding gap function satisfies
Recall and for all . Together with , it follows that (4.13) reduces to or equivalently,
Consequently, the -person information market game satisfies -convexity if and only if (4.14) holds as well as any slope , is bounded from below by . Particularly, (4.10) holds for all . Finally, it is left to the reader to derive from (4.14) the relevant inequality involving . That is,
In summary, in the setting of Theorem 4.4, the case applies to -person information market games, which are -convex. Particularly, the current procedure for the determination of the nucleolus agrees with the known approach valid for -convex games [6].

#### 5. The Three-Person Information Market Game

The three-person information market game (with ) is given as shown in Table 1.

Note that for , as well as , where . Here is a necessary and sufficient condition for nonemptiness of the core. The three-person information market game is -convex if, besides , one of the following equivalences hold: Its core is described by the constraints and for , as well as . The constraint is redundant, while the constraint is a necessary and sufficient condition for nonemptiness of the core. We distinguish two cases concerning the core structure, depending on the location of the core constraint with respect to the parallel line . In case , then the core is a triangle with three vertices , , and , representing the core of a -convex three-person game. Its nucleolus is given by the center of the core, that is .

In case , then the core has five vertices , , , , and representing the core of a convex three-person game (with respect to its imputation set).

Concerning the condition (4.6), the following equivalences hold (provided ): According to the main Theorem 4.4, to conclude with, if , then , and hence, the parametric representation of the nucleolus is given by .

If , then , , and hence, the parametric representation of the nucleolus is given by .

If varies upwards from zero till , then the nucleolus starts at and moves with a speed scaled by . If varies downwards from till , then the nucleolus starts at and moves with a speed scaled by . Anyhow, the nucleolus moves by two different speeds from being the full core if till , being the center of the core if with four vertices , ,, and .

#### 6. The Shapley Value of the Information Market Game

Theorem 6.1. *The Shapley value of the innovator in the -person information market game equals the difference between one half of the aggregate pay-off and the average worth of coalitions not containing the innovator, that is,
*

*Proof. *Put . Using its classical formula [7], the Shapley value of the innovator is determined as follows:

*Remark 6.2. *The Shapley value is a symmetric allocation, which verifies the upper core bound .

Indeed, by Lemma 3.2(i), it holds for all and so, where the last inequality is due to the assumption . Thus, for all , , whereas the Shapley value for users does not necessarily meet the lower core bound . For instance, for the three-person information market game (with and ), the following equivalences hold: where . By the super-additivity (or zero-monotonicity) of the information market game, its Shapley value satisfies individual rationality, that is, for all . To conclude, the Shapley value of the information market game is an imputation, but not necessarily a core allocation (in spite of the validity of the upper core bound for users).

#### 7. Concluding Remarks

In this paper, we study the information market games, which have been recently introduced by Galdeano et al. [1]. In Section 3, we study the condition for the core to be not empty. We refer the reader to Section 4 where the nucleolus is determined through a characterization of the symmetrical part of the core. Furthermore, simple proof of the Shapley value of the information market game is given in Section 5.

#### Acknowledgment

The first author acknowledges financial support by the National Science Foundation of China (NSFC) through Grants nos. 71171163 and 71271171.

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