Sharing the Proceeds from a Hierarchical Venture

Jens Leth Hougaard; Juan D. Moreno-Ternero; Mich Tvede; Lars Peter Østerdal

Sharing the Proceeds from a Hierarchical Venture

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

Research output: Working paper › Research

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 a no-transfer rule (where no revenue bubbles up) and a 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. Our benchmark model refers to the case of linear hierarchies, but we also extend the analysis to the case in which hierarchies may convey a general tree structure and include joint ownerships.

Original language	English
Place of Publication	Louvain
Publisher	Center for Operations Research and Econometrics, Université Catholique de Louvain
Number of pages	24
Publication status	Published - Jul 2015
Externally published	Yes

Series	CORE Discussion Paper
Number	2015/31

Keywords

Hierarchies
Joint ventures
Resource allocation
Transfer rules
MIT strategy

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Cite this

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AU - Hougaard, Jens Leth

AU - Moreno-Ternero, Juan D.

AU - Tvede, Mich

AU - Østerdal, Lars Peter

PY - 2015/7

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N2 - 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 a no-transfer rule (where no revenue bubbles up) and a 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. Our benchmark model refers to the case of linear hierarchies, but we also extend the analysis to the case in which hierarchies may convey a general tree structure and include joint ownerships.

AB - 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 a no-transfer rule (where no revenue bubbles up) and a 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. Our benchmark model refers to the case of linear hierarchies, but we also extend the analysis to the case in which hierarchies may convey a general tree structure and include joint ownerships.

KW - Hierarchies

KW - Joint ventures

KW - Resource allocation

KW - Transfer rules

KW - MIT strategy

KW - Hierarchies

KW - Joint ventures

KW - Resource allocation

KW - Transfer rules

KW - MIT strategy

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T3 - CORE Discussion Paper

BT - Sharing the Proceeds from a Hierarchical Venture

PB - Center for Operations Research and Econometrics, Université Catholique de Louvain

CY - Louvain

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