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Cooperative provision of indivisible public goods

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  • dEHEZ, Pierre

    ()
    (Université catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium)

Abstract

A community faces the obligation of providing an indivisible public good. Each member is capable of providing it at a certain cost and the solution is to rely on the player who can do it at the lowest cost. It is then natural that he or she be compensated by the other players. The question is to know how much they should each contribute. We model this compensation problem as a cost sharing game to which standard allocation rules are applied and related to the solution resulting from the auction procedures proposed by Kleindorfer and Sertel (1994).

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2010026.

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Date of creation: 01 May 2010
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Handle: RePEc:cor:louvco:2010026

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Keywords: public goods; cost sharing; core; nucleolus; Shapley value;

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  1. Kleindorfer Paul R. & Sertel Murat R., 1994. "Auctioning the Provision of an Indivisible Public Good," Journal of Economic Theory, Elsevier, vol. 64(1), pages 20-34, October.
  2. S. C. Littlechild & G. Owen, 1973. "A Simple Expression for the Shapley Value in a Special Case," Management Science, INFORMS, vol. 20(3), pages 370-372, November.
  3. Faulhaber, Gerald R, 1975. "Cross-Subsidization: Pricing in Public Enterprises," American Economic Review, American Economic Association, vol. 65(5), pages 966-77, December.
  4. Kunreuther, Howard & Kleindorfer, Paul & Knez, Peter J. & Yaksick, Rudy, 1987. "A compensation mechanism for siting noxious facilities: Theory and experimental design," Journal of Environmental Economics and Management, Elsevier, vol. 14(4), pages 371-383, December.
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