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Decentralized pricing in minimum cost spanning trees

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Author Info

  • Jens Hougaard

    ()

  • Hervé Moulin

    ()

  • Lars Østerdal

    ()

Abstract

In the minimum cost spanning tree model we consider decentralized pricing rules, i.e. rules that cover at least the efficient cost while the price charged to each user only depends upon his own connection costs. We define a canonical pricing rule and provide two axiomatic characterizations. First, the canonical pricing rule is the smallest among those that improve upon the Stand Alone bound, and are either superadditive or piece-wise linear in connection costs. Our second, direct characterization relies on two simple properties highlighting the special role of the source cost.

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File URL: http://hdl.handle.net/10.1007/s00199-009-0485-6
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 44 (2010)
Issue (Month): 2 (August)
Pages: 293-306

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Handle: RePEc:spr:joecth:v:44:y:2010:i:2:p:293-306

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Related research

Keywords: Pricing rules; Minimum cost spanning trees; Canonical pricing rule; Stand-alone cost; Decentralization; C71; D60;

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References

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  1. Moulin, Herve, 1992. "Welfare bounds in the cooperative production problem," Games and Economic Behavior, Elsevier, vol. 4(3), pages 373-401, July.
  2. Norde, H.W. & Moretti, S. & Tijs, S.H., 2004. "Minimum cost spanning tree games and population monotonic allocation schemes," Open Access publications from Tilburg University urn:nbn:nl:ui:12-123753, Tilburg University.
  3. Brânzei, R. & Moretti, S. & Norde, H.W. & Tijs, S.H., 2004. "The P-value for cost sharing in minimum cost spanning tree situations," Open Access publications from Tilburg University urn:nbn:nl:ui:12-142598, Tilburg University.
  4. Bergantinos, Gustavo & Vidal-Puga, Juan J., 2007. "A fair rule in minimum cost spanning tree problems," Journal of Economic Theory, Elsevier, vol. 137(1), pages 326-352, November.
  5. Hervé Moulin & Scott Shenker, 2001. "Strategyproof sharing of submodular costs:budget balance versus efficiency," Economic Theory, Springer, vol. 18(3), pages 511-533.
  6. Dutta, Bhaskar & Kar, Anirban, 2004. "Cost monotonicity, consistency and minimum cost spanning tree games," Games and Economic Behavior, Elsevier, vol. 48(2), pages 223-248, August.
  7. Moulin, H., 1986. "Characterizations of the pivotal mechanism," Journal of Public Economics, Elsevier, vol. 31(1), pages 53-78, October.
  8. Demko, Stephen & Hill, Theodore P., 1988. "Equitable distribution of indivisible objects," Mathematical Social Sciences, Elsevier, vol. 16(2), pages 145-158, October.
  9. Moulin, H., 1989. "Uniform Externalities: Two Axioms For Fair Allocation," UFAE and IAE Working Papers 117-89, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  10. Bogomolnaia, Anna & Moulin, Herve, 2001. "A New Solution to the Random Assignment Problem," Journal of Economic Theory, Elsevier, vol. 100(2), pages 295-328, October.
  11. Brams,Steven J. & Taylor,Alan D., 1996. "Fair Division," Cambridge Books, Cambridge University Press, number 9780521556446, November.
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Cited by:
  1. Jens Leth Hougaard & Mich Tvede, 2010. "Strategyproof Nash Equilibria in Minimum Cost Spanning Tree Models," MSAP Working Paper Series 01_2010, University of Copenhagen, Department of Food and Resource Economics.
  2. Hougaard, Jens Leth & Tvede, Mich, 2012. "Truth-telling and Nash equilibria in minimum cost spanning tree models," European Journal of Operational Research, Elsevier, vol. 222(3), pages 566-570.

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