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• Herve Moulin

A "sequential stand alone mechanism" shares costs incrementally according to a fixed ordering of the users: the first user always pays stand alone cost, the second pays the stand alone cost of the first two users minus that of the first and so on. If the second derivatives of costs are of a constant sign, such a method yields a unique strong equilibrium at every profile of convex preferences in the game where each user chooses his own demand. This equilibrium, in turn, defines a coalition strategy-proof social choice function.

Under decreasing marginal costs and submodular costs, the sequential stand alone mechanisms are almost characterized by these properties; the only exception is the binary demand case (each agent consumes zero or one unit) where a rich family of cost sharing methods (the Shapley value among them) yields a coalition strategy-proof equilibrium selection. Under increasing marginal costs and supermodular costs, coalition strategy-proofness characterizes a richer family of cost sharing methods: they give out one unit at a time while charging marginal costs, with the users taking turns according to a sequence fixed in advance. These methods contain serial cost sharing as a limit case.

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Article provided by Springer in its journal Social Choice and Welfare.

Volume (Year): 16 (1999)
Issue (Month): 2 ()
Pages: 279-320
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Handle: RePEc:spr:sochwe:v:16:y:1999:i:2:p:279-320

Note: Received: 8 July 1997/Accepted: 22 January 1998
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1. Leroux, Justin, 2004. "Pooling Private Technologies: Improving upon Autarky," Working Papers 2004-08, Rice University, Department of Economics. [Downloadable!]
2. Leroux, Justin, 2005. "Strategyproof Profit Sharing in Partnerships: Improving upon Autarky," Working Papers 2005-05, Rice University, Department of Economics. [Downloadable!]
3. Ruben Juarez, 2008. "The worst absolute surplus loss in the problem of commons: random priority versus average cost," Economic Theory, Springer, vol. 34(1), pages 69-84, January. [Downloadable!] (restricted)

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