We propose two axiomatic theories of cost sharing with the common premise that individual demands are comparable, though perhaps different, commodities, and that agents are responsible for their own demand. Under partial responsibility the agents are not responsible for the asymmetries of the cost function: two agents consuming the same amount of output always pay the same price; this holds true under full responsibility only if the cost function is symmetric in all individual demands. If the cost function is additively separable, each agent pays his/her stand alone cost under full responsibility; this holds true under partial responsibility only if, in addition, the cost function is symmetric. By generalizing Moulin and Shenker.s (1999) Distributivity axiom to cost- sharing methods for heterogeneous goods, we identify in each of our two theories a different serial method. The subsidy-free serial method (Moulin, 1995) is essentially the only distributive method meeting Ranking and Dummy. The cross-subsidizing serial method (Sprumont, 1998) is the only distributive method satisfying Separability and Strong Ranking. Finally, we propose an alternative characterization of the latter method based on a strengthening of Distributivity.
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Paper provided by Rice University, Department of Economics in its series Working Papers with number
2002-05.
Find related papers by JEL classification: C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
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