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“Almost†subsidy-free spatial pricing in a multi-dimensional setting

  • DREZE, Jacques

    (Université catholique de Louvain (UCL). Center for Operations Research and Econometrics (CORE))

  • LE BRETON, Michel
  • SAVVATEEV, Alexei
  • WEBER, Shlomo

Consider a population of citizens uniformly spread over the entire plane, that faces a problem of locating public facilities to be used by its members. The cost of every facility is financed by its users, who also face an idiosyncratic private access cost to the facility. We assume that the facilities' cost is independent of location and access costs are linear with respect to the Euclidean distance. We show that an external intervention that covers 0.19% of the facility cost is sufficient to guarantee secession-proofness or no cross-subsidization, where no group of individuals is charged more than its stand alone cost incurred if it had acted on its own. Moreover, we demonstrate that in this case the Rawlsian access pricing is the only secession-proof allocation.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2007047.

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Date of creation: 01 Jul 2007
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Handle: RePEc:cor:louvco:2007047
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  1. Casella, Alessandra, 2001. "The Role of Market Size in the Formation of Jurisdictions," Review of Economic Studies, Wiley Blackwell, vol. 68(1), pages 83-108, January.
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