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Three Methods to Share Joint Costs or Surplus

  • Eric Friedman
  • Moulin, Herve

We study cost sharing methods with variable demands of heterogeneous goods, additive in the cost function and meeting the Dummy axiom. We consider four axioms: Scale Invariance (SI); Demand Monotonicity (DM); Upper Bound for Homogeneous Goods (UBH) placing a natural cap on cost shares when goods are homogeneous; Average Cost Pricing for Homogeneous Goods (ACPH). The random order values based on Stand Alone costs are characterized by SI and DM. Serial costsharing, by DM and UB; the Aumann-Shapley pricing method, by SI and ACPH. No other combination of the four axioms is compatible with Additivity and Dummy.

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Paper provided by Duke University, Department of Economics in its series Working Papers with number 95-38.

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Date of creation: 1995
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Publication status: Published in JOURNAL OF ECONOMIC THEORY, Vol. 87, 1999, pages 275-331
Handle: RePEc:duk:dukeec:95-38
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Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097

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Web page: http://econ.duke.edu/

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  1. Moulin, Herve & Shenker, Scott, 1992. "Serial Cost Sharing," Econometrica, Econometric Society, vol. 60(5), pages 1009-37, September.
  2. Sprumont, Y., 1996. "Ordinal Cost Sharing," Cahiers de recherche 9624, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. HervÊ Moulin, 1999. "Incremental cost sharing: Characterization by coalition strategy-proofness," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 16(2), pages 279-320.
  4. Henriet, D. & Moulin, H., 1993. "Traffic Based Cost Allocation in Network," G.R.E.Q.A.M. 93a19, Universite Aix-Marseille III.
  5. Martin Shubik, 1962. "Incentives, Decentralized Control, the Assignment of Joint Costs and Internal Pricing," Management Science, INFORMS, vol. 8(3), pages 325-343, April.
  6. Chun, Youngsub, 1988. "The proportional solution for rights problems," Mathematical Social Sciences, Elsevier, vol. 15(3), pages 231-246, June.
  7. Young, H Peyton, 1985. "Producer Incentives in Cost Allocation," Econometrica, Econometric Society, vol. 53(4), pages 757-65, July.
  8. William W. Sharkey & Richard P. McLean, 1998. "Weighted Aumann-Shapley pricing," International Journal of Game Theory, Springer;Game Theory Society, vol. 27(4), pages 511-523.
  9. Wang, YunTong, 1999. "The additivity and dummy axioms in the discrete cost sharing model," Economics Letters, Elsevier, vol. 64(2), pages 187-192, August.
  10. Moulin, HervÈ & Shenker, Scott, 1997. "Distributive and Additive Costsharing of an Homogeneous Good," Working Papers 97-21, Duke University, Department of Economics.
  11. Moulin, Herve, 1995. "On Additive Methods to Share Joint Costs," Mathematical Social Sciences, Elsevier, vol. 30(1), pages 98-99, August.
  12. Khmelnitskaya, Anna B., 1999. "Marginalist and efficient values for TU games," Mathematical Social Sciences, Elsevier, vol. 38(1), pages 45-54, July.
  13. Alchian, Armen A & Demsetz, Harold, 1972. "Production , Information Costs, and Economic Organization," American Economic Review, American Economic Association, vol. 62(5), pages 777-95, December.
  14. Moulin Herve & Shenker Scott, 1994. "Average Cost Pricing versus Serial Cost Sharing: An Axiomatic Comparison," Journal of Economic Theory, Elsevier, vol. 64(1), pages 178-201, October.
  15. Amartya K. Sen, 1966. "Labour Allocation in a Cooperative Enterprise," Review of Economic Studies, Oxford University Press, vol. 33(4), pages 361-371.
  16. E. Loehman & A. Whinston, 1974. "An Axiomatic Approach to Cost Allocation for Public Investment," Public Finance Review, SAGE Publishing, vol. 2(2), pages 236-250, April.
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