Assignment of Heterogeneous Agents in Trees under the Permission Value

Abstract

We investigate assignment of heterogeneous agents in trees where the allocation rule is given by the permission value. We focus on efficient hierarchies,namely those, for which the payoff of the top agent is maximized. For additive games, such hierarchies are always cogent, namely, more productive agents occupy higher positions. The result can be extended to non-additive games with appropriate restrictions on the value function. Finally, we consider auctions where agents bid for positions in a two agent vertical hierarchy. Under simultaneous bidding, an equilibrium does not exist while sequential bidding always results in a non-cogent hierarchy