Allocating environmental costs among heterogeneous sources: The linear damage equivalent mechanism
AbstractA group of firms has to divide the costs associated with environmental damages jointly generated as a by-product of their heterogeneous production activities. We propose a specific procedure to assign costs, the Linear Damage Equivalent Mechanism (LDE), which satisfies several appealing strategic and axiomatic properties. The LDE induces a strategic game that has an unambiguous noncooperative prediction, a unique Nash equilibrium which is also robust to coalitional deviations; moreover, the equilibrium is efficient. Among its other properties, we find that the LDE is immune to arbitrary changes in the units of account of the outputs.
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Bibliographic InfoPaper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/6042.
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Environmental damages; Cost-sharing; Heterogeneous sources;
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