Yeah, hi folks this is Mat again. I am going to tell you a little about the

Shapley Value now which is one of the most prominent ways of dividing up the value of

a society, the productive value of some, set of individuals among its members. And,

you know, the, the, the basic idea in coalition or cooperative games in terms

of, trying to figure out, allocating values is having some notion of what the

right way to do things is. And, and we might say, even in quotes say, what's the

fair way of, of a coalition to divide up it's payoff? it's obviously going to

depend on the way that we define fairness and it the literature has basically then,

taken ways taken axioms as the primary way of expressing the properties of what the,

the desired properties are of, of rules for dividing up things. So, so what we're

going to do is then have some set of axioms or properties that we want to

satisfy and then see what that gives us. the Shapley Value is, is based on Lloyd

Shapley's idea that members should basically be receiving things which are

proportional to their marginal contributions. Okay? So, so basically we

look at what, what does a person add when we add them to a group. and they should be

getting something that reflects their added value to the society. Okay, so

what's the, the tricky part about this? And let's just take a quick example, and

that'll give us an idea of why we have to be careful in doing this. So let's suppose

that the, everybody in, together in a society can generate 1. But that if we're

missing any member of society we get 0. So this is say, of a committee and the

committee all has to be present in order for, for it to do anything. So if it's

missing any of its members it can't just make it decide, decide on anything. so in

this situation, what do we th, so we've got, you know, v of n is equal to 1, v of

s is 0. If, if we're looking at any s that's smaller than n. N. so in, in this

situation what's true, then the marginal contribution if we take any individual out

of this group, thei r marginal contribution is 1, right. So everybody is

essential for generating this 1. So everybody's marginal contribution to the,

the co. the society without them is 1. And in this situation, we can't pay everybody

what they're responsible for in terms of, of leading, ultimately to the, to the

grand coalition. So, we're going to have to think about some way of weighting

contributions in order to, come up with a, a reasonable thing. And obviously, for

this particular rule, it would be reasonable to. To, to add up things by 1

over n, so everybody gets 1/nth of the contribution. but in rules where, in

situations where there just might be some asymmetric, asymmetries in terms of who

contributes which value, we're going to have to think very carefully about how

this should be weighted. Okay. So, Shapley's axioms are going to give us

a handle on this. So let's take a look at those. so the first idea is a very simple

one, and one which pretty much any rule that you would, would think of in these

settings is, is going to satisfy. So if we think of 2 different members of a society.

Say, i and j. if they contribute the same thing to every possible coalition in which

they could be a member. They're completely interchangeable. So that, if we're looking

at some, coalition that has neither i nor j in it. If we add i to that coalition, we

get exactly the same value as we get when we add j to that coalition. If they're

interchangeable, then they should be getting out the same allocation of value.

So if Si is the way that we're dividing up the value from some coalitional game, then

we should be giving the same thing to i as j when they're completely interchangeable,

okay? This is a fairly uncontroversial axiom. it, it, it really captures a basic

notion of fairness. That if it's, you know if individuals are completely equivalent

they should get equivalent payments. Okay, next axiom. dummy players.

So I'm sure that, that everyone has had some. experiences with people like this

whats the idea there is a s ituation where you add a person eye to a coalition and

they add absolutely nothing so no matter what 'S' we look at if we add 'I' to a

particular 'S' we get the same value as, as the situation with without that

individual. So basically the person's completely worthless no matter what

coalition we're looking at. so the, the idea is, then the axiom is. if an

individual is a dummy player then we give them nothing now this is on 1 hand its a

fairly reasonable axeum if someone is contributing absolutely nothing then there

is no reason they should get anything on the other hand this depends very much on

the perspective You're taking. So, if we're thinking about a society. It

could be that, that I contributes nothing, because of reasons beyond I's control. So

if something happened. They had a, an accident. Or, for, for some particular

reason, they, aren't able to function. society might still want to allocate

something to those individuals. So it really depends on what the time

perspective is. Whether we're thinking about social insurance. and so forth. But,

but nonetheless, it's a fairly intuitive axiom, and it's going to be a fairly

powerful one in, in, in what it delivers. Next one is additivity. this one is one

which you might think of more about the process of allocating value. So let's

suppose that we can think about looking at a. Cooperative game or coalitional game

and we can, it, it's one that separates very nicely into 2 different parts. So we

can think of it as, as you've got one cooperative game, you've got another one

and we think of what do you get when you sum these two things together. And the

idea is that if we're looking at two different coa, cooperative games.

And then we think about what would happen if you, were trying to allocate something.

When you summed them up, you should get the same thing from allocating one,

allocating according to the second, and then adding those two things up. Okay? So

the idea here is if, if we're looking at a cooperative game where the value of any

coalition is just what it gets under the first game, plus what it gets under the

second game. Then the way that we allocate values should be how we allocated things

under the first game plus how we allocated things under the second game. So, you

know? This is, fairly obvious in terms of what it means mathematically. In terms of,

of how you interpret this, and what the story is for why you might desire to have

to satisfy an axiom like this, that's a little harder. You could think of this as

a story for saying, you know, maybe society one day produces according to v1,

and the next day according to v2 And if what it produces the second day doesn't

depend on what it produced the first day, then we should, we should be able to

allocate the, the fruits of the production in the first day, and then allocate again

on the second day. And, and those things since they don't interact at all. We

should be able to do that separately and what an individual gets is just the sum of

those two things. So you can think of a fairly logical story for this kind of

axiom. Okay so what do we get from these three axioms? the Shapley value, and let's

have a look at exactly how you define the Shapley value. So the value, the, the

Shapley Value is going to be marginal calculations. What does an individual i

add to coalitions that don't have i when we add. So we've got coalition with i in

it, coalition without i. We then take a, a peek at how much generates and then what

we're going to be doing is weighting that by different possible ways in which we

could've come up with this marginal calculation. And then dividing through by

all the possible ways that, we could have done this. Okay? So we'll make sure we

average over all these things. so that everything sums up to the full value.

Okay. That's the, the Shapley value. We're going

to dissect this in, in more detail in a moment. and what's the theorem? The

theorem is that if we look at a coalitional game or cooperative game,

there is a unique way, that divides t he full payoff of the grand coalition so if

we're making sure we divide everything up that satisfies symmetry, dummy and

additivity. So if we put those three axioms together there is only one way to

do it. And that way is the Shapley Value. So there is a unique way which does

satisfy these and it's the Shapley Value. So that's a pretty powerful theorem there

is a fairly elegant proof to this. it's fairly intuitive.

We're not going to go through that in detail but we'll go through some

explanations of this. You can find the proof fairly easily in a number of

different places. there's actually a nice book by Osborne and Rubinstein which is

free on-line which has a proof of this. But there's a, a number of places where

you can find this. Okay. Let's have a peek at, the actual value, in

terms of what, how this breaks down. And then we'll look at some examples. So, what

in-, individualized giving is, according to this formula, looks a little daunting.

But the intuitions are fairly simple. So let's think, we're thinking of marginal

contributions. How are they coming. about so what we going to do is we going to

think of all the different possible ways we can build society up so for instance we

could be building society up by first adding person 1 then adding person say 3

Then adding person 2 right , so we that would be one order in which we could build

a society up. we could also have built it up, up by first adding person 2, then

adding person 3. then adding person 1 right? So there's a whole series of

different ways if we had a 3 person society that we can go about building

these things up. And in each according to each of these orders, will have different

setting, different marginal contributions along the way. So here, first person one

contributes something. Then person three adds their production. Then person two

adds their production and so forth. So we end up with these. these different

contributions and that's what this is going to capture. So what we're doing is

we're looking at the se different sequences.

And the first part we're doing is, is calculating as we went along the sequence

what did i add when they were added? next we weight this by the different possible

ways that we could've built up the coalitions before i was added. Then we

also weight this by the different orders different ways we could add the

individuals who haven't been added yet, after i has been added, right. So there's