Imputation (game theory)

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In fully cooperative games players act efficiently when they form a single coalition, the grand coalition. The focus of the game is to find acceptable distributions of the payoff of the grand coalition. Distributions where a player receives less than it could obtain on its own, without cooperating with anyone else, are unacceptable - a condition known as individual rationality. Imputations are distributions that are efficient and are individually rational.

[edit] Example

Mrs Arnold and Mrs Bauer are knitting gloves. The gloves are one-size-fits-all, and two gloves make a pair that they sell for €5. They have each made 3 gloves. How to share the proceeds from the sale? The problem can be described by a characteristic function form game with the following characteristic function: Each lady has 3 gloves, that is 1 pair with a market value of €5. Together, they have 6 gloves or 3 pair, having a market value of €15. Then all possible distributions of this sum are imputations, where none of the ladies gets less than €5, the amount they can achieve on their own. For instance (7.5, 7.5) is an imputation, but so is (5, 10) or (9, 6).

The example can be generalised. If Mrs Carlson and Mrs Delacroix are also part of the club and still each lady has made 3 gloves, now the total to distribute is 12 gloves, six pairs, that is, €30. At the same time one of the ladies, on her own can still get only €5. Thus imputations share €30, such that no-one gets less than €5. The following are all imputations: (7.5, 7.5, 7.5, 7.5), (10, 5, 10, 5), (5, 15, 5, 5) or (7, 5, 9, 9).