Example Application of the b-Core: Buyer Coalition Problem with Beliefs - Belief-based Stability in Coalition Formation with Uncertainty - page 117

Problem with Beliefs

5.1.1 Are the Utility Really Transferable?

As one can see, there are potential problems with these social util-
ity maximization approaches. The first concern is their assumption of
transferable utilities . At the first sight, this may seem natural enough:
after all, it is money that counts in most economical problems in real
life, and money is commonly regarded as transferable.
However, if one thinks more about it, then it is clear that a buyer's
utility, defined as above, may not be actually transferable for the fol-
lowing reasons.
First, a buyer's saving is not a completely accurate indication of an
agent's preference because it ignores the difference in reservation prices
among the different products when computing the aggregate saving: a
saving of $100 out of a $1,000 product is probably more satisfactory
(that is, of a higher utility) than saving $100 out of a $10,000 product,
as the former represents a 10% discount whereas the latter represents a
1% discount only. Therefore, if buyer A saves $100 in buying a product
of worth $1,000, he cannot 'transfer' the same amount of utility gained
by saving, to buyer B who is buying a product of $10,000, even if he
gives buyer 'B' the $100 he saves. This implies the utilities are actually
not always completely transferable.
Second, a shopper's preference may also be influenced by other
factors in addition to the saving amount. For example, a buyer's satis-
faction may depend on the brand name, seller's reputation as well as
the amount saved. This means that the preference order of an agent
should be a multi issue problem (e.g., a saving of $100 for a Brand-A
camera to be delivered the following day may be a better outcome
than a saving of $200 for a Brand-B camera to be delivered one month
later, even if the buyer's reservation prices for these products are the
same). This again suggests that the more general non-transferable util-
ity model should be more suitable in describing the problem.