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Minimum Cost Connection Networks: Truth-telling and Implementation

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  • Jens Leth Hougaard

    ()
    (Department of Food and Resource Economics, University of Copenhagen)

  • Mich Tvede

    (Newcastle University Business School, Newcastle University)

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    Abstract

    In the present paper we consider the allocation of cost in connection networks. Agents have connection demands in form of pairs of locations they want to be connected. Connections between locations are costly to build. The problem is to allocate costs of networks satisfying all connection demands. We use three axioms to characterize allocation rules that truthfully implement cost minimizing networks satisfying all connection demands in a game where: (1) a central planner announces an allocation rule and a cost estimation rule; (2) every agent reports her own connection demand as well as all connection costs; and, (3) the central planner selects a cost minimizing network satisfying reported connection demands based on estimated connection costs and allocates true connection costs of the selected network.

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    File URL: http://okonomi.foi.dk/workingpapers/MSAPpdf/MSAP2013/MSAP_WP03_2013.pdf
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    Bibliographic Info

    Paper provided by University of Copenhagen, Department of Food and Resource Economics in its series MSAP Working Paper Series with number 03_2013.

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    Length: 20 pages
    Date of creation: Oct 2013
    Date of revision:
    Handle: RePEc:foi:msapwp:03_2013

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    Web page: http://www.msap.life.ku.dk/
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    Related research

    Keywords: axiomatic characterization; connection networks; cost sharing; implementation; truth-telling;

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    1. Ruben Juarez & Rajnish Kumar, 2013. "Implementing efficient graphs in connection networks," Economic Theory, Springer, vol. 54(2), pages 359-403, October.
    2. Bergantiños, Gustavo & Vidal-Puga, Juan, 2010. "Realizing fair outcomes in minimum cost spanning tree problems through non-cooperative mechanisms," European Journal of Operational Research, Elsevier, vol. 201(3), pages 811-820, March.
    3. Tijs, Stef & Branzei, Rodica & Moretti, Stefano & Norde, Henk, 2006. "Obligation rules for minimum cost spanning tree situations and their monotonicity properties," European Journal of Operational Research, Elsevier, vol. 175(1), pages 121-134, November.
    4. 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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