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Decentralized Pricing in Minimum Cost Spanning Trees

Author

Listed:
  • Jens Leth Hougaard

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

  • Hervé Moulin

    (Department of Economics, Rice University)

  • Lars Peter Østerdal

    (Department of Economics, University of Copenhagen)

Abstract

In the minimum cost spanning tree model we consider decentralized pricing rules, i.e. rules that cover at least the efficient cost while the price charged to each user only depends upon his own connection costs. We define a canonical pricing rule and provide two axiomatic characterizations. First, the canonical pricing rule is the smallest among those that improve upon the Stand Alone bound, and are either superadditive or piece-wise linear in connection costs. Our second, direct characterization relies on two simple properties highlighting the special role of the source cost.

Suggested Citation

  • Jens Leth Hougaard & Hervé Moulin & Lars Peter Østerdal, 2008. "Decentralized Pricing in Minimum Cost Spanning Trees," Discussion Papers 08-24, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:0824
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    References listed on IDEAS

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    Cited by:

    1. Anna Bogomolnaia & Ron Holzman & Hervé Moulin, 2021. "Worst Case in Voting and Bargaining," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-03196999, HAL.
    2. Han, Lining & Juarez, Ruben, 2018. "Free intermediation in resource transmission," Games and Economic Behavior, Elsevier, vol. 111(C), pages 75-84.
    3. Bogomolnaia, Anna & Holzman, Ron & Moulin, Hervé, 2023. "On guarantees, vetoes and random dictators," Theoretical Economics, Econometric Society, vol. 18(1), January.
    4. Hougaard, Jens Leth & Tvede, Mich, 2022. "Trouble comes in threes: Core stability in minimum cost connection networks," European Journal of Operational Research, Elsevier, vol. 297(1), pages 319-324.
    5. Juarez, Ruben & Ko, Chiu Yu & Xue, Jingyi, 2018. "Sharing sequential values in a network," Journal of Economic Theory, Elsevier, vol. 177(C), pages 734-779.
    6. Jens Leth Hougaard & Mich Tvede, 2020. "Trouble Comes in Threes: Core stability in Minimum Cost Connection Networks," IFRO Working Paper 2020/07, University of Copenhagen, Department of Food and Resource Economics.
    7. Anna bogomolnaia Ron Holzman Herve Moulin, 2021. "Wost Case in Voting and Bargaining," Papers 2104.02316, arXiv.org.
    8. María Gómez-Rúa & Juan Vidal-Puga, 2017. "A monotonic and merge-proof rule in minimum cost spanning tree situations," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(3), pages 813-826, March.
    9. Jens Leth Hougaard & Hervé Moulin, 2018. "Sharing the cost of risky projects," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 65(3), pages 663-679, May.
    10. Jens Leth Hougaard & Mich Tvede, 2010. "Strategyproof Nash Equilibria in Minimum Cost Spanning Tree Models," MSAP Working Paper Series 01_2010, University of Copenhagen, Department of Food and Resource Economics.
    11. 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.

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    More about this item

    Keywords

    pricing rules; minimum cost spanning trees; canonical pricing rule; stand-alone cost; decentralization;
    All these keywords.

    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • D60 - Microeconomics - - Welfare Economics - - - General

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