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Sharing the Cost of Redundant Items

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Author Info

  • Jens Leth Hougaard

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

  • Hervé Moulin

    ()
    (Department of Economics, Rice University)

Abstract

We ask how to share the cost of finitely many public goods (items) among users with different needs: some smaller subsets of items are enough to serve the needs of each user, yet the cost of all items must be covered, even if this entails inefficiently paying for redundant items. Typical examples are network connectivity problems when an existing (possibly inefficient) network must be maintained. We axiomatize a family of simple usage indices, one for each agent and for each item, measuring the relative worth of this item across agents, and generating cost sharing rules additive in costs.

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File URL: http://okonomi.foi.dk/workingpapers/MSAPpdf/MSAP2012/MSAP_WP06_2012.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 06_2012.

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Length: 22 pages
Date of creation: Sep 2012
Date of revision:
Handle: RePEc:foi:msapwp:06_2012

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

Keywords: Cost sharing; Redundant costs; Connection networks; Connectivity;

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References

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  1. S.C. Littlechild & G.F. Thompson, 1977. "Aircraft Landing Fees: A Game Theory Approach," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 186-204, Spring.
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Cited by:
  1. Yuntong Wang, 2013. "An Axiomatic Approach to the Airline Emission Fees Problem," Working Papers 1308, University of Windsor, Department of Economics.
  2. Debing Ni & Yuntong Wang, 2013. "Additive cost sharing on a tree," Working Papers 1307, University of Windsor, Department of Economics.

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