Mishra, SK (2016): A note on construction of a composite index by optimization of Shapley value shares of the constituent variables.

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Abstract
This paper proposes a method to construct composite index, which is a linear combination of several variables, by deriving weights on the criterion of Shapley value (from cooperative game theory) that a constituent variable has in making the composite index. In practice it is found oftentimes that the most common method of principal component analysis has a tendency to ignore (or poorly weigh) those constituent variables that do not have strong correlation with the sister variables. This elitist nature of PCA forces a compromise upon the analyst’s desire and need to incorporate those weakly correlated (but theoretically and practically important) variables into the composite index. In that case, one must construct a composite index that is more inclusive in nature. The Shapley value based composite index meets that requirement.
Item Type:  MPRA Paper 

Original Title:  A note on construction of a composite index by optimization of Shapley value shares of the constituent variables 
Language:  English 
Keywords:  Shapley value, Composite index, Principal Component Analysis, Inclusive indices, Global optimization 
Subjects:  C  Mathematical and Quantitative Methods > C4  Econometric and Statistical Methods: Special Topics > C43  Index Numbers and Aggregation C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C61  Optimization Techniques ; Programming Models ; Dynamic Analysis C  Mathematical and Quantitative Methods > C6  Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C63  Computational Techniques ; Simulation Modeling C  Mathematical and Quantitative Methods > C7  Game Theory and Bargaining Theory > C71  Cooperative Games 
Item ID:  72330 
Depositing User:  Sudhanshu Kumar Mishra 
Date Deposited:  02 Jul 2016 12:39 
Last Modified:  02 Jul 2016 12:40 
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URI:  https://mpra.ub.unimuenchen.de/id/eprint/72330 