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On how to allocate the fixed cost of transport networks

Author

Listed:
  • Teresa Estañ

    (Centro de Investigación Operativa (CIO), Universidad Miguel Hernández de Elche.)

  • Natividad Llorca

    (Centro de Investigación Operativa (CIO), Universidad Miguel Hernández de Elche.)

  • Ricardo Martínez

    (Department of Economic Theory and Economic History, University of Granada.)

  • Joaquín Sánchez-Soriano

    (Centro de Investigación Operativa (CIO), Universidad Miguel Hernández de Elche..)

Abstract

In this study, we consider different cities located along a tram line. Each city may have one or several stations and information is available about the flow of passengers between any pair of stations. A fixed cost (salaries of the executive staff, repair facilities, or fixed taxes) must be divided among the cities. This cost is independent of the number of passengers and the length of the line. We propose a mathematical model to identify suitable mechanisms for sharing the fixed cost. In the proposed model, we propose, and characterize axiomatically, three rules, which include the uniform split, the proportional allocation and a intermediate situation. The analyzed axioms represent the basic requirements for fairness and elemental properties of stability.

Suggested Citation

  • Teresa Estañ & Natividad Llorca & Ricardo Martínez & Joaquín Sánchez-Soriano, 2019. "On how to allocate the fixed cost of transport networks," ThE Papers 19/03, Department of Economic Theory and Economic History of the University of Granada..
    • Handle: RePEc:gra:wpaper:19/03
    as

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    File URL: http://www.ugr.es/~teoriahe/RePEc/gra/wpaper/thepapers19_03.pdf
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    References listed on IDEAS

    as
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    Keywords

    axiom; cost game; cost sharing; fairness; transport networks.;
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