Superadditivity
The property that two groups with no members in common can always do at least as well by merging as by working separately.
Often misread asAssuming superadditivity holds automatically in any sensible setting, when crowding, coordination costs, competition rules or congestion can leave a merged group worth less than its parts.
How to see it
They could always have carried on as before
Merging two groups with no members in common never leaves them worse off than staying apart, because at the very least the merged group can go on doing exactly what the two separate groups were doing. That is the usual reason for assuming the grand coalition forms.
The checkIt holds only if the merged group can replicate the separate behaviour at no extra cost. Where merging imposes a cost of its own, the property fails and the grand coalition stops being the natural object.
Try itTwo consultancies of two people each merge. Ask what stops the merged firm running two independent teams exactly as before. If the answer is nothing, the property holds here. If the answer is a partner meeting that now has to include everyone, it may not.
Know these first
Leads on to
Easily confused with
Sources
- von Neumann, J. & Morgenstern, O. (1944). Princeton UP.
- Osborne, M. & Rubinstein, A. (1994). MIT Press.
- Maschler, M., Solan, E. and Zamir, S. (2013). Game Theory. Cambridge University Press.