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Strategy-proof cost sharing under increasing returns: Improvement of the supremal welfare loss

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  • Hashimoto, Kazuhiko
  • Saitoh, Hiroki

Abstract

We consider a mechanism design problem in economies with increasing returns. We construct a new class of rules, called w-hybrid rules, and characterize them by strategy-proofness, anonymity, envy-freeness, consumer sovereignty, and non-bossiness. We show that w-hybrid rules improve the supremal welfare loss compared with the average cost pricing rule (Moulin, 1999 and Moulin and Shenker, 2001).

Suggested Citation

  • Hashimoto, Kazuhiko & Saitoh, Hiroki, 2015. "Strategy-proof cost sharing under increasing returns: Improvement of the supremal welfare loss," Games and Economic Behavior, Elsevier, vol. 89(C), pages 101-121.
    • Handle: RePEc:eee:gamebe:v:89:y:2015:i:c:p:101-121
    DOI: 10.1016/j.geb.2014.12.004
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    References listed on IDEAS

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    1. Hervé Moulin & Scott Shenker, 2001. "Strategyproof sharing of submodular costs:budget balance versus efficiency," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 18(3), pages 511-533.
    2. Kazuhiko Hashimoto & Hiroki Saitoh, 2016. "Strategy-proof rules for an excludable public good," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 46(4), pages 749-766, April.
    3. Shinji Ohseto, 2010. "Serial Mechanisms For The Provision Of An Excludable Public Good," The Japanese Economic Review, Japanese Economic Association, vol. 61(4), pages 507-516, December.
    4. Mehta, Aranyak & Roughgarden, Tim & Sundararajan, Mukund, 2009. "Beyond Moulin mechanisms," Games and Economic Behavior, Elsevier, vol. 67(1), pages 125-155, September.
    5. Shinji Ohseto, 2005. "Augmented serial rules for an excludable public good," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 26(3), pages 589-606, October.
    6. HervÊ Moulin, 1999. "Incremental cost sharing: Characterization by coalition strategy-proofness," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 16(2), pages 279-320.
    7. Mutuswami, Suresh, 2005. "Strategyproofness, Non-Bossiness and Group Strategyproofness in a cost sharing model," Economics Letters, Elsevier, vol. 89(1), pages 83-88, October.
    8. Ruben Juarez, 2008. "The worst absolute surplus loss in the problem of commons: random priority versus average cost," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 34(1), pages 69-84, January.
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    Cited by:

    1. William Thomson, 2016. "Non-bossiness," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 47(3), pages 665-696, October.
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    3. Harless, Patrick, 2017. "Wary of the worst: Maximizing award guarantees when new claimants may arrive," Games and Economic Behavior, Elsevier, vol. 105(C), pages 316-328.

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    More about this item

    Keywords

    Strategy-proofness; Cost sharing; Increasing returns; Supremal welfare loss; Average cost pricing; Hybrid rule;
    All these keywords.

    JEL classification:

    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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