Transferable utility
Encyclopedia
Transferable utility is a term used in cooperative
game theory
and in economics
. Utility
is transferable if one player can losslessly transfer part of its utility to another player. Such transfers are possible if the players have a common currency
that is valued equally by all. Note that being able to transfer cash
payoff
s does not imply that utility is transferable: wealthy and poor players may derive a different utility from the same amount of money.
Transferable utility is assumed in many cooperative game
s, where the payoff
s are not given for individual players, but only for coalitions. In this case the assumption implies that irrespective of the division of the coalitional payoff, members of the coalition enjoy the same total utility
.
Cooperative game
In game theory, a cooperative game is a game where groups of players may enforce cooperative behaviour, hence the game is a competition between coalitions of players, rather than between individual players...
game theory
Game theory
Game theory is a mathematical method for analyzing calculated circumstances, such as in games, where a person’s success is based upon the choices of others...
and in economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
. Utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
is transferable if one player can losslessly transfer part of its utility to another player. Such transfers are possible if the players have a common currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...
that is valued equally by all. Note that being able to transfer cash
Cash
In common language cash refers to money in the physical form of currency, such as banknotes and coins.In bookkeeping and finance, cash refers to current assets comprising currency or currency equivalents that can be accessed immediately or near-immediately...
payoff
Payoff
Payoff may refer to:* Bribery* A payoff dominant equilibrium in game theory* Payoff matrix or payoff function in a normal form game in game theory* Payoff set in set theory* Payoff, a 1991 TV film starring Keith Carradine...
s does not imply that utility is transferable: wealthy and poor players may derive a different utility from the same amount of money.
Transferable utility is assumed in many cooperative game
Cooperative game
In game theory, a cooperative game is a game where groups of players may enforce cooperative behaviour, hence the game is a competition between coalitions of players, rather than between individual players...
s, where the payoff
Payoff
Payoff may refer to:* Bribery* A payoff dominant equilibrium in game theory* Payoff matrix or payoff function in a normal form game in game theory* Payoff set in set theory* Payoff, a 1991 TV film starring Keith Carradine...
s are not given for individual players, but only for coalitions. In this case the assumption implies that irrespective of the division of the coalitional payoff, members of the coalition enjoy the same total utility
Utility
In economics, utility is a measure of customer satisfaction, referring to the total satisfaction received by a consumer from consuming a good or service....
.