Prof. Frank Huettner of SKK GSB has co-authored a paper in the prestigious European Journal of Operational Research, presenting a method of calculating payouts fairly in a world full of side effects and externalities.

If, for example, two car manufacturers merge, the consequences are not limited to those two companies—the merger reshapes the market for every other manufacturer. We often assume that one group’s actions do not affect anyone outside that group, but this is rarely true once externalities are taken into account. Prof. Huettner’s research examines how to preserve fairness even when such side effects are pervasive.

Working with Prof. André Casajus of HHL Leipzig Graduate School of Management and Prof. Yukihiko Funaki of Waseda University, Prof. Huettner proved that the MPW solution (named after Macho‑Stadler, Pérez‑Castrillo, and Wettstein, who characterized the rule in 2007) is the only specific way to calculate payouts fairly in this setting. The MPW solution operates by considering all possible ways that groups (coalitions) could form and then averaging the resulting payouts to arrive at the most balanced outcome for everyone involved.

This discovery has important real‑world applications, including dividing the costs of greenhouse gas emissions fairly and sharing the costs of building and maintaining public infrastructure.

Research Paper: Balanced contributions, consistency, and value for games with externalities