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An Axiomatic Approach to Cost Allocation for Public Investment

Author

Listed:
  • E. Loehman

    (University of Florida (Gainesville))

  • A. Whinston

    (Purdue University)

Abstract

A previously presented charge scheme for public investments is derived here from a set of axioms. It is argued that these axioms embody a definition of equity in allocating the costs of a public facility and could serve as a constitution which would be agreed on by users of a public facility. Consideration is also given to optimality properties of the charge scheme in encouraging the formation of coalitions to undertake joint investments.

Suggested Citation

  • E. Loehman & A. Whinston, 1974. "An Axiomatic Approach to Cost Allocation for Public Investment," Public Finance Review, , vol. 2(2), pages 236-250, April.
    • Handle: RePEc:sae:pubfin:v:2:y:1974:i:2:p:236-250
    DOI: 10.1177/109114217400200205
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    References listed on IDEAS

    as
    1. Edna Loehman & Andrew Whinston, 1971. "A New Theory of Pricing and Decision-Making for Public Investment," Bell Journal of Economics, The RAND Corporation, vol. 2(2), pages 606-625, Autumn.
    2. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-283, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    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. Vanovermeire, Christine & Sörensen, Kenneth, 2014. "Measuring and rewarding flexibility in collaborative distribution, including two-partner coalitions," European Journal of Operational Research, Elsevier, vol. 239(1), pages 157-165.
    3. José Alcalde & José Angel Silva, 2000. "- A Procedure For Sharing Recycling Costs," Working Papers. Serie AD 2000-14, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    4. Jerry Green, 2005. "Compensatory transfers in two-player decision problems," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(2), pages 159-180, June.
    5. Alcalde, Jose & Angel Silva, Jose, 2004. "A proposal for sharing costs," Journal of Mathematical Economics, Elsevier, vol. 40(7), pages 831-845, November.
    6. Loehman, Edna & Dinar, Ariel, 1992. "Cooperative Technology Solutions to Externality Problems: The Case of Irrigation Water," Working Papers 232418, University of California, Davis, Department of Agricultural and Resource Economics.
    7. Friedman, Eric & Moulin, Herve, 1999. "Three Methods to Share Joint Costs or Surplus," Journal of Economic Theory, Elsevier, vol. 87(2), pages 275-312, August.
    8. Vanovermeire, Christine & Sörensen, Kenneth, 2014. "Integration of the cost allocation in the optimization of collaborative bundling," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 72(C), pages 125-143.
    9. VANOVERMEIRE, Christine & SÖRENSEN, Kenneth, 2013. "Measuring and rewarding flexibility in collaborative distribution, including two-partner coalitions," Working Papers 2013017, University of Antwerp, Faculty of Business and Economics.
    10. Radhakrishnan, Suresh & Balachandran, Kashi R., 1995. "Stochastic choice hazard and incentives in a common service facility," European Journal of Operational Research, Elsevier, vol. 81(2), pages 324-335, March.
    11. Sprumont, Yves, 2000. "Coherent Cost-Sharing Rules," Games and Economic Behavior, Elsevier, vol. 33(1), pages 126-144, October.
    12. Zara, Stefano & Dinar, Ariel & Patrone, Fioravante, 2006. "Cooperative game theory and its application to natural, environmental, and water resource issues : 2. application to natural and environmental resources," Policy Research Working Paper Series 4073, The World Bank.
    13. Edna T. Loehman, 2009. "Voluntary Cost-Sharing for Environmental Risk Reduction: A Pollution Abatement Case Study," Group Decision and Negotiation, Springer, vol. 18(4), pages 349-368, July.
    14. Mariusz Kaleta & Eugeniusz Toczyłowski, 2009. "A cost allocation framework for LP and GLP games," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 19(4), pages 27-46.
    15. VANOVERMEIRE, Christine & SÖRENSEN, Kenneth, 2013. "Integration of the cost allocation in the optimization of collaborative bundling," Working Papers 2013019, University of Antwerp, Faculty of Business and Economics.
    16. VANOVERMEIRE, Christine & SÖRENSEN, Kenneth & VAN BREEDAM, Alex & VANNIEUWENHUYSE, Bart & VERSTREPEN, Sven, 2012. "Efficient supply chains through flexible horizontal collaboration," Working Papers 2012007, University of Antwerp, Faculty of Business and Economics.

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