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Minimum Cost Connection Networks: Truth-telling and Implementation

Author

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  • Jens Leth Hougaard

    () (Department of Food and Resource Economics, University of Copenhagen)

  • Mich Tvede

    (Newcastle University Business School, Newcastle University)

Abstract

In the present paper we consider the allocation of cost in connection networks. Agents have connection demands in form of pairs of locations they want to be connected. Connections between locations are costly to build. The problem is to allocate costs of networks satisfying all connection demands. We use three axioms to characterize allocation rules that truthfully implement cost minimizing networks satisfying all connection demands in a game where: (1) a central planner announces an allocation rule and a cost estimation rule; (2) every agent reports her own connection demand as well as all connection costs; and, (3) the central planner selects a cost minimizing network satisfying reported connection demands based on estimated connection costs and allocates true connection costs of the selected network.

Suggested Citation

  • Jens Leth Hougaard & Mich Tvede, 2013. "Minimum Cost Connection Networks: Truth-telling and Implementation," MSAP Working Paper Series 03_2013, University of Copenhagen, Department of Food and Resource Economics.
  • Handle: RePEc:foi:msapwp:03_2013
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    File URL: http://okonomi.foi.dk/workingpapers/MSAPpdf/MSAP2013/MSAP_WP03_2013.pdf
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    References listed on IDEAS

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    1. Tijs, Stef & Branzei, Rodica & Moretti, Stefano & Norde, Henk, 2006. "Obligation rules for minimum cost spanning tree situations and their monotonicity properties," European Journal of Operational Research, Elsevier, vol. 175(1), pages 121-134, November.
    2. Hougaard, Jens Leth & Tvede, Mich, 2012. "Truth-telling and Nash equilibria in minimum cost spanning tree models," European Journal of Operational Research, Elsevier, vol. 222(3), pages 566-570.
    3. Gustavo Bergantiños & Leticia Lorenzo, 2004. "A non-cooperative approach to the cost spanning tree problem," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 59(3), pages 393-403, July.
    4. Ruben Juarez & Rajnish Kumar, 2013. "Implementing efficient graphs in connection networks," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 54(2), pages 359-403, October.
    5. repec:spr:compst:v:59:y:2004:i:3:p:393-403 is not listed on IDEAS
    6. Bergantiños, Gustavo & Vidal-Puga, Juan, 2010. "Realizing fair outcomes in minimum cost spanning tree problems through non-cooperative mechanisms," European Journal of Operational Research, Elsevier, vol. 201(3), pages 811-820, March.
    7. Bogomolnaia, Anna & Moulin, Hervé, 2010. "Sharing a minimal cost spanning tree: Beyond the Folk solution," Games and Economic Behavior, Elsevier, vol. 69(2), pages 238-248, July.
    8. Jackson, Matthew O, 1991. "Bayesian Implementation," Econometrica, Econometric Society, vol. 59(2), pages 461-477, March.
    9. Moulin, Hervé, 2014. "Pricing traffic in a spanning network," Games and Economic Behavior, Elsevier, vol. 86(C), pages 475-490.
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    Citations

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    Cited by:

    1. Hougaard, Jens Leth & Moreno-Ternero, Juan D. & Tvede, Mich & Østerdal, Lars Peter, 2017. "Sharing the proceeds from a hierarchical venture," Games and Economic Behavior, Elsevier, vol. 102(C), pages 98-110.
    2. repec:eee:energy:v:139:y:2017:i:c:p:220-230 is not listed on IDEAS
    3. repec:spr:joecth:v:65:y:2018:i:3:d:10.1007_s00199-017-1034-3 is not listed on IDEAS

    More about this item

    Keywords

    axiomatic characterization; connection networks; cost sharing; implementation; truth-telling;

    JEL classification:

    • C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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