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Sharing the Cost of Redundant Items

Author

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  • Jens Leth Hougaard

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

  • Hervé Moulin

    () (Department of Economics, Rice University)

Abstract

We ask how to share the cost of finitely many public goods (items) among users with different needs: some smaller subsets of items are enough to serve the needs of each user, yet the cost of all items must be covered, even if this entails inefficiently paying for redundant items. Typical examples are network connectivity problems when an existing (possibly inefficient) network must be maintained. We axiomatize a family of simple usage indices, one for each agent and for each item, measuring the relative worth of this item across agents, and generating cost sharing rules additive in costs.

Suggested Citation

  • Jens Leth Hougaard & Hervé Moulin, 2012. "Sharing the Cost of Redundant Items," MSAP Working Paper Series 06_2012, University of Copenhagen, Department of Food and Resource Economics.
  • Handle: RePEc:foi:msapwp:06_2012
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    File URL: http://okonomi.foi.dk/workingpapers/MSAPpdf/MSAP2012/MSAP_WP06_2012.pdf
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    References listed on IDEAS

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    1. Moulin, Herve, 2002. "Axiomatic cost and surplus sharing," Handbook of Social Choice and Welfare,in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 6, pages 289-357 Elsevier.
    2. N. Lesca, 2011. "Introduction," Post-Print halshs-00640604, HAL.
    3. S.C. Littlechild & G.F. Thompson, 1977. "Aircraft Landing Fees: A Game Theory Approach," Bell Journal of Economics, The RAND Corporation, vol. 8(1), pages 186-204, Spring.
    4. William Thomson, 2011. "Consistency and its converse: an introduction," Review of Economic Design, Springer;Society for Economic Design, vol. 15(4), pages 257-291, December.
    5. William Thomson, 2007. "Cost allocation and airport problems," RCER Working Papers 537, University of Rochester - Center for Economic Research (RCER).
    6. Pradeep Dubey, 1982. "The Shapley Value as Aircraft Landing Fees--Revisited," Management Science, INFORMS, vol. 28(8), pages 869-874, August.
    7. Moulin, Herve & Laigret, Francois, 2011. "Equal-need sharing of a network under connectivity constraints," Games and Economic Behavior, Elsevier, vol. 72(1), pages 314-320, May.
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    Cited by:

    1. Debing Ni & Yuntong Wang, 2013. "Additive cost sharing on a tree," Working Papers 1307, University of Windsor, Department of Economics.
    2. Eric Bahel & Christian Trudeau, 2018. "Stability and fairness in the job scheduling problem," Working Papers 1803, University of Windsor, Department of Economics.
    3. Yuntong Wang, 2013. "An Axiomatic Approach to the Airline Emission Fees Problem," Working Papers 1308, University of Windsor, Department of Economics.

    More about this item

    Keywords

    Cost sharing; Redundant costs; Connection networks; Connectivity;

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D30 - Microeconomics - - Distribution - - - General
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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