Sharing the proceeds from a hierarchical venture when agents have needs
R. Pablo Arribillaga, Juan D. Moreno-Ternero, Pablo Neme
TLDR
This paper proposes need-adjusted geometric and serial rules for distributing revenues in hierarchical ventures, considering individual agent needs.
Key contributions
- Addresses revenue distribution in hierarchical ventures, accounting for individual agent needs.
- Introduces "need-adjusted geometric rules" where net revenue "bubbles up" the hierarchy.
- Proposes a "need-adjusted serial rule" for equal sharing among agents and their predecessors.
Why it matters
This paper provides novel frameworks for fair revenue distribution in complex organizational structures. It's crucial for designing equitable compensation models in ventures where individual contributions and needs vary.
Original Abstract
We consider a setting in which a set of agents are hierarchically organized for a joint venture. They each generate revenues for the joint venture and have individual needs to cover. The aim is to distribute aggregate revenues appropriately. We characterize a family of need-adjusted geometric rules where the net revenue (after covering needs) "bubbles up" in the hierarchy, as well as a need-adjusted serial rule in which the net revenue is equally shared among each agent and his predecessors in the hierarchy.
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