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Fair allocation of production externalities : recent results

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  • Hervé Moulin
  • Yves Sprumont

Abstract

We survey recent axiomatic results in the theory of cost-sharing. A method assigns cost shares to the users of a facility for any profile of demands and any monotonic cost function. We discuss two radically different views of the asymmetries of the cost function. Under full responsibility, each agent is accountable for the part of the costs that can be unambiguously separated and attributed to her own demand. Under partial responsibility, the asymmetries of the cost function have no bearing on individual cost shares, only the differences in demand levels matter. We describe several invariance and monotonicity properties that reflect both normative and strategic concerns. We uncover a number of logical trade-offs between our axioms, and derive axiomatic characterizations: in the full responsibility approach, of the Shapley-Shubik, Aumann-Shapley, and subsidy-free serial methods; in the partial responsibility approach, of the cross-subsidizing serial method and of the family of quasi-proportional methods.

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Bibliographic Info

Article provided by Dalloz in its journal Revue d'économie politique.

Volume (Year): Volume 117 (2007)
Issue (Month): 1 ()
Pages: 7-36

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Handle: RePEc:cai:repdal:redp_171_0007

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Web page: http://www.cairn.info/revue-d-economie-politique.htm

Related research

Keywords: cost-sharing methods; fairness; responsibility;

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References

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  1. Moulin, Herve, 2002. "Axiomatic cost and surplus sharing," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 6, pages 289-357 Elsevier.
  2. Sprumont, Yves, 1998. "Ordinal Cost Sharing," Journal of Economic Theory, Elsevier, vol. 81(1), pages 126-162, July.
  3. Samet, Dov & Tauman, Yair, 1982. "The Determination of Marginal Cost Prices under a Set of Axioms," Econometrica, Econometric Society, vol. 50(4), pages 895-909, July.
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  5. Ori Haimanko, 2000. "Value theory without symmetry," International Journal of Game Theory, Springer, vol. 29(3), pages 451-468.
  6. Moulin, Herve & Sprumont, Yves, 2006. "Responsibility and cross-subsidization in cost sharing," Games and Economic Behavior, Elsevier, vol. 55(1), pages 152-188, April.
  7. Archer, Aaron & Feigenbaum, Joan & Krishnamurthy, Arvind & Sami, Rahul & Shenker, Scott, 2004. "Approximation and collusion in multicast cost sharing," Games and Economic Behavior, Elsevier, vol. 47(1), pages 36-71, April.
  8. Sharkey,William W., 1983. "The Theory of Natural Monopoly," Cambridge Books, Cambridge University Press, number 9780521271943, October.
  9. Moulin, Herve & Shenker, Scott, 1992. "Serial Cost Sharing," Econometrica, Econometric Society, vol. 60(5), pages 1009-37, September.
  10. Moulin, Herve & Sprumont, Yves, 2004. "On Demand Responsiveness in Additive Cost Sharing," Working Papers 2004-03, Rice University, Department of Economics.
  11. Wang, YunTong, 1999. "The additivity and dummy axioms in the discrete cost sharing model," Economics Letters, Elsevier, vol. 64(2), pages 187-192, August.
  12. Flam, S. D. & Jourani, A., 2003. "Strategic behavior and partial cost sharing," Games and Economic Behavior, Elsevier, vol. 43(1), pages 44-56, April.
  13. Biung-Ghi Ju & Eiichi Miyagawa & Toyotaka Sakai, 2003. "Non-Manipulable Division Rules in Claim Problems and Generalizations," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200307, University of Kansas, Department of Economics, revised Aug 2005.
  14. SPRUMONT, Yves, 2004. "Nearly Serial Sharing Methods," Cahiers de recherche 17-2004, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  15. Hervé Moulin, 1995. "On Additive Methods To Share Joint Costs," The Japanese Economic Review, Japanese Economic Association, vol. 46(4), pages 303-332, December.
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  23. Roemer John E. & Silvestre Joaquim, 1993. "The Proportional Solution for Economies with Both Private and Public Ownership," Journal of Economic Theory, Elsevier, vol. 59(2), pages 426-444, April.
  24. Koster, Maurice & Tijs, Stef & Borm, Peter, 1998. "Serial cost sharing methods for multi-commodity situations," Mathematical Social Sciences, Elsevier, vol. 36(3), pages 229-242, December.
  25. Yves Sprumont, 2005. "On the Discrete Version of the Aumann-Shapley Cost-Sharing Method," Econometrica, Econometric Society, vol. 73(5), pages 1693-1712, 09.
  26. Moulin, Herve, 1994. "Serial Cost-Sharing of Excludable Public Goods," Review of Economic Studies, Wiley Blackwell, vol. 61(2), pages 305-25, April.
  27. Ju, Biung-Ghi & Miyagawa, Eiichi & Sakai, Toyotaka, 2007. "Non-manipulable division rules in claim problems and generalizations," Journal of Economic Theory, Elsevier, vol. 132(1), pages 1-26, January.
  28. Eric J. Friedman, 2004. "Paths and consistency in additive cost sharing," International Journal of Game Theory, Springer, vol. 32(4), pages 501-518, 08.
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Citations

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Cited by:
  1. Txus Ortells & Juan Santos, 2011. "The pseudo-average rule: bankruptcy, cost allocation and bargaining," Computational Statistics, Springer, vol. 73(1), pages 55-73, February.
  2. SPRUMONT, Yves, 2004. "Nearly Serial Sharing Methods," Cahiers de recherche 2004-14, Universite de Montreal, Departement de sciences economiques.
  3. Sylvain Béal & Marc Deschamps & Joël Thomas Ravix & Olivier Sautel, 2010. "Informational Advantage and Influence of Communicating Central Banks," Documents de Travail de l'OFCE 2010-04, Observatoire Francais des Conjonctures Economiques (OFCE).
  4. Eric Bahel, 2011. "The implications of the ranking axiom for discrete cost sharing methods," International Journal of Game Theory, Springer, vol. 40(3), pages 551-589, August.
  5. Drehmann, Mathias & Tarashev, Nikola, 2013. "Measuring the systemic importance of interconnected banks," Journal of Financial Intermediation, Elsevier, vol. 22(4), pages 586-607.
  6. Eric Bahel & Hans Haller, 2012. "Cycles with Undistinguished Actions and Extended Rock-Paper-Scissors Games," Working Papers e07-35, Virginia Polytechnic Institute and State University, Department of Economics.

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