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Axiomatic and strategic justifications for the constrained equal benefits rule in the airport problem

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  • Hu, Cheng-Cheng
  • Tsay, Min-Hung
  • Yeh, Chun-Hsien
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    Abstract

    We consider the “airport problem”, which is concerned with sharing the cost of an airstrip among agents who need airstrips of different lengths. We investigate the implications of two properties, Left-endpoint Subtraction (LS) bilateral consistency and LS converse consistency, in the airport problem. First, on the basis of the two properties, we characterize the constrained equal benefits rule, which equalizes agentsʼ benefits subject to no one receiving a subsidy. Second, we introduce a 2-stage extensive form game that exploits LS bilateral consistency and LS converse consistency. We show that there is a unique subgame perfect equilibrium outcome of the game and moreover, it is the allocation chosen by the constrained equal benefits rule.

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    Bibliographic Info

    Article provided by Elsevier in its journal Games and Economic Behavior.

    Volume (Year): 75 (2012)
    Issue (Month): 1 ()
    Pages: 185-197

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    Handle: RePEc:eee:gamebe:v:75:y:2012:i:1:p:185-197

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    Web page: http://www.elsevier.com/locate/inca/622836

    Related research

    Keywords: Bilateral consistency; Converse consistency; Constrained equal benefits rule; Subgame perfect equilibrium; Airport problem;

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    Cited by:
    1. Moreno-Ternero, Juan D., 2013. "A new analysis of a simple model of fair allocation," Economics Letters, Elsevier, vol. 118(2), pages 393-395.

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