Manipulation via merging and splitting in claims problems (Q1414889)

The paper considers a problem of dividing wealth between agents having individual claims not all of which may be possible to fulfill by the amount to divide. A rule, which is a list of individual shares, is non-manipulable via splitting if no one can benefit by splitting his claim into claims of a group of new agents and himself and it is non-manipulable via merging if no group of agents can benefit by merging their claims into the claim of a single agent in the group. The paper characterizes the family of rules which satisfy each of these two axioms, together with some other axioms of continuity, consistency and equal treatment of equals which are standard in the literature, and goes on to weaken these two axioms in the characterizations by allowing only minimal coalitions of pairs. The characterizations are in terms of ``superadditivity'' (respectively, ``subadditivity'') in claims for non-manipulabality via pairwise splitting (respectively, pairwise merging). Let \({\mathcal N}\) denote the set of all finite subsets of the set of natural numbers. For each \(N\in{\mathcal N}\) and \(i\in N\), agent \(i\)'s claim is a nonnegative real number denoted by \(c_i\). A vector of claims is a \(c\equiv(c_i)_{i\in N}\in\mathbb{R}^n_+\). A claims problem is a pair \((c, E)\in\mathbb{R}^n_+\times \mathbb{R}_+\) of claims vector \(c\) and an amount to divide \(E\) satisfying \(\sum_{i\in N} c_i\geq E\). Let \({\mathcal C}^N\) be the collection of all such claims problem for \(N\). Let \({\mathcal C}\equiv\bigcup_{N\in{\mathcal N}}{\mathcal C}^N\). An allocation for \((c, E)\in{\mathcal C}^N\) is a vector \(x\equiv(x_i)_{i\in N}\in \mathbb{R}^n_+\) such that \(0\leq x\leq c\) and \(\sum_{i\in N} x_i= E\). A rule is a function \(\varphi:{\mathcal C}\to \bigcup_{N\in{\mathcal N}}\mathbb{R}^N_+\) mapping each claims problem into an allocation. Let \(H\) be the family of functions \(h: [a,b]\times\mathbb{R}_+\to\mathbb{R}_+\), where \([a, b]\subset[-\infty,+\infty]\), such that \(h\) is continuous, non-decreasing in the first argument and for each \(c_0\in\mathbb{R}_+\), \(h(a,c_0)= 0\) and \(h(b,c_0)= c_0\). A rule \(\varphi\) is a parametric rule if there exists a function \(h\in H\) such that for all \(N\in{\mathcal N}\) and all \((c, E)\in{\mathcal C}^N\), \(\varphi(c, E)= (h(\lambda, c_i))_{i\in N}\), where \(\lambda\in [a,b]\) is such that \(\sum_{i\in N} h(\lambda, c_i)= E\) and \(h\) is called a representation of \(\varphi\). The following theorem is known in the literature: Theorem: A rule satisfies equal treatment of equals, consistency and continuity if and only if it is a parametric rule. A representation \(h: [a, b]\times\mathbb{R}_+\to\mathbb{R}_+\) is superadditive (resp. subadditive) in claim if for all \(\lambda\in [a,b]\) and all \(c_0,c_0'\in \mathbb{R}_+\), \(h(\lambda, c_0+ c_0')\geq h(\lambda, c_0)+ h(\lambda, c_0')\) (resp. \(\leq\)). These properties, if satisfied by a rule, are shown to be invariant in the representations of the rule. A rule is non-manipulable via pairwise splitting if the following is satisfied: for all \(N\in{\mathcal N}\), all \((c,E)\in{\mathcal C}^N\), all \(i\in N\), and all \(j\not\in N\), if \(c'\in \mathbb{R}^{N\cup j}_+\) is such that \(c_i'+ c_j'= c_i\) and \(c_{N\setminus i}'\equiv c_{N\setminus i}\), \[ \varphi_i(c, E)\geq\varphi_i(c', E)+ \varphi_j(c', E). \] A rule is non-manipulable via pairwise merging if the following is satisfied: for all \(N\in{\mathcal N}\), \(i\in N\), all \(j\not\in N\), and all \((c,E)\in{\mathcal C}^{N\cup j}\), if \(c'\in R^n_+\) is such that \(c_i+ c_j= c_i'\) and \(c_{N\setminus i}'\equiv c_{N\setminus\{i,j\}}\), \[ \varphi_i(c', E)\leq \varphi_i(c, E)+ \varphi_j(c, E). \] The following proposition is established which, together with the theorem cited above, leads immediately to the main theorem: Proposition: A parametric rule is non-manipulable via pairwise splitting (resp. merging) if and only if its representations are superadditive (resp. subadditive) in claim.