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Fair Allocation of Production Externalities: Recent Results

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Author Info
SPRUMONT, Yves
MOULIN, Hervé

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Abstract

We survey recent axiomatic results in the theory of cost-sharing. In this litterature, a method computes the individual cost shares assigned to the users of a facility for any profile of demands and any monotonic cost function. We discuss two theories taking radically different views of the asymmetries of the cost function. In the full responsibility theory, each agent is accountable for the part of the costs that can be unambiguously separated and attributed to her own demand. In the partial responsibility theory, the asymmetries of the cost function have no bearing on individual cost shares, only the differences in demand levels matter. We describe several invariance and monotonicity properties that reflect both normative and strategic concerns. We uncover a number of logical trade-offs between our axioms, and derive axiomatic characterizations of a handful of intuitive methods: in the full responsibility approach, the Shapley-Shubik, Aumann-Shapley, and subsidyfree serial methods, and in the partial responsibility approach, the cross-subsidizing serial method and the family of quasi-proportional methods.

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Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2005-22.

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Length: 35 pages
Date of creation: 2005
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Handle: RePEc:mtl:montde:2005-22

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Young, H Peyton, 1985. "Producer Incentives in Cost Allocation," Econometrica, Econometric Society, vol. 53(4), pages 757-65, July. [Downloadable!] (restricted)
  2. Friedman, Eric & Moulin, Herve, 1999. "Three Methods to Share Joint Costs or Surplus," Journal of Economic Theory, Elsevier, vol. 87(2), pages 275-312, August. [Downloadable!] (restricted)
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  3. Aadland, David & Kolpin, Van, 2004. "Environmental determinants of cost sharing," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 495-511, April. [Downloadable!] (restricted)
  4. William Thomson, 1999. "Welfare-domination under preference-replacement: A survey and open questions," Social Choice and Welfare, Springer, vol. 16(3), pages 373-394. [Downloadable!] (restricted)
  5. Wang, YunTong, 1999. "The additivity and dummy axioms in the discrete cost sharing model," Economics Letters, Elsevier, vol. 64(2), pages 187-192, August. [Downloadable!] (restricted)
  6. SPRUMONT, Yves, 2004. "Nearly Serial Sharing Methods," Cahiers de recherche 2004-14, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
  7. Sprumont, Yves, 1998. "Ordinal Cost Sharing," Journal of Economic Theory, Elsevier, vol. 81(1), pages 126-162, July. [Downloadable!] (restricted)
  8. Yves Sprumont, 2005. "On the Discrete Version of the Aumann-Shapley Cost-Sharing Method," Econometrica, Econometric Society, vol. 73(5), pages 1693-1712, 09. [Downloadable!] (restricted)
  9. Moulin, Herve & Shenker, Scott, 1992. "Serial Cost Sharing," Econometrica, Econometric Society, vol. 60(5), pages 1009-37, September. [Downloadable!] (restricted)
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  13. Flam, S. D. & Jourani, A., 2003. "Strategic behavior and partial cost sharing," Games and Economic Behavior, Elsevier, vol. 43(1), pages 44-56, April. [Downloadable!] (restricted)
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  15. Fleurbaey, Marc & Maniquet, Francois, 1996. "Cooperative Production: A Comparison of Welfare Bounds," Games and Economic Behavior, Elsevier, vol. 17(2), pages 200-208, December. [Downloadable!] (restricted)
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  18. Roemer John E. & Silvestre Joaquim, 1993. "The Proportional Solution for Economies with Both Private and Public Ownership," Journal of Economic Theory, Elsevier, vol. 59(2), pages 426-444, April. [Downloadable!] (restricted)
  19. Eric J. Friedman, 2004. "Paths and consistency in additive cost sharing," International Journal of Game Theory, Springer, vol. 32(4), pages 501-518, 08. [Downloadable!] (restricted)
  20. Moulin, Herve & Sprumont, Yves, 2005. "On demand responsiveness in additive cost sharing," Journal of Economic Theory, Elsevier, vol. 125(1), pages 1-35, November. [Downloadable!] (restricted)
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  21. Moulin, Herve, 1994. "Serial Cost-Sharing of Excludable Public Goods," Review of Economic Studies, Blackwell Publishing, vol. 61(2), pages 305-25, April. [Downloadable!] (restricted)
  22. Ori Haimanko, 2000. "Value theory without symmetry," International Journal of Game Theory, Springer, vol. 29(3), pages 451-468. [Downloadable!] (restricted)
  23. Fleurbaey Marc, 1995. "Three Solutions for the Compensation Problem," Journal of Economic Theory, Elsevier, vol. 65(2), pages 505-521, April. [Downloadable!] (restricted)
  24. Koster, Maurice & Tijs, Stef & Borm, Peter, 1998. "Serial cost sharing methods for multi-commodity situations," Mathematical Social Sciences, Elsevier, vol. 36(3), pages 229-242, December. [Downloadable!] (restricted)
  25. Samet, Dov & Tauman, Yair, 1982. "The Determination of Marginal Cost Prices under a Set of Axioms," Econometrica, Econometric Society, vol. 50(4), pages 895-909, July. [Downloadable!] (restricted)
  26. Moulin, Herve, 2002. "Axiomatic cost and surplus sharing," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 6, pages 289-357 Elsevier. [Downloadable!] (restricted)
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  27. Martin Shubik, 1961. "Incentives, Decentralized Control, the Assignment of Joint Costs and Internal Pricing," Cowles Foundation Discussion Papers 112, Cowles Foundation, Yale University. [Downloadable!]
  28. MOULIN, Hervé & SPRUMONT, Yves., 2002. "Responsibility and Cross-Subsidization in Cost Sharing," Cahiers de recherche 2002-19, Universite de Montreal, Departement de sciences economiques. [Downloadable!]
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  1. Yves Sprumont, 2008. "Nearly serial sharing methods," International Journal of Game Theory, Springer, vol. 37(2), pages 155-184, June. [Downloadable!] (restricted)
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