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‘Almost’ subsidy-free spatial pricing in a multi-dimensional setting

  • Jacques, DREZE

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Center for Operations Research and Econometrics (CORE) - Belgium)

  • Michel, LE BRETON

    (Université de Toulouse I, GREMAQ and IDEI, Toulouse, France)

  • Alexei , SAVVATEV

    (NES, Moscow)

  • Sholmo, WEBER

    (Southern Methodist University, Dallas, USA and Université Catholique de Louvain, CORE - Belgium)

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 O.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, Département des Sciences Economiques in its series Discussion Papers (ECON - Département des Sciences Economiques) with number 2007030.

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Length: 23
Date of creation: 01 Sep 2007
Date of revision:
Handle: RePEc:ctl:louvec:2007030
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