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Sharing the proceeds from a hierarchical venture

2016; Elsevier BV; Volume: 102; Linguagem: Inglês

10.1016/j.geb.2016.10.016

1090-2473

Jens Leth Hougaard, Juan D. Moreno‐Ternero, Mich Tvede, Lars Peter Østerdal,

Auction Theory and Applications

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.