Sharing a Reward Based on Peer Evaluations

Abstract: We study a problem where a group of agents has to decide how some fixed value should be shared among them. We are interested in settings where the share that each agent receives is based on how that agent is evaluated by other members of the group, where highly regarded agents receive a greater share compared to agents that are not well regarded. We introduce two mechanisms for determining agents' shares: the peer-evaluation mechanism, where each agent gives a direct evaluation for every other member of the group, and the peer-prediction mechanism, where each agent is asked to report how they believe group members will evaluate a particular agent. The sharing is based on the provided information. While both mechanisms are individually rational, the first mechanism is strategy-proof and budget-balanced, but it can be collusion-prone. Further, the second mechanism is collusion-resistant and incentive-compatible.