Responsibility and cross-subsidization in cost sharing

Moulin, H. and Sprumont, Y. (2006) Responsibility and cross-subsidization in cost sharing. Games and Economic Behavior, 55(1), pp. 152-188. (doi:10.1016/j.geb.2005.03.006)

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Abstract

We propose two cost-sharing theories in which agents demand comparable commodities and are responsible for their own demand. Under partial responsibility, agents are not responsible for the asymmetries of the cost function: two agents consuming the same quantity pay the same price; this holds under full responsibility only if the cost function is symmetric. If the cost function is additively separable, each agent pays her stand-alone cost under full responsibility; this holds under partial responsibility only if the cost function is also symmetric. We generalize Moulin and Shenker's Distributivity axiom to cost-sharing methods for heterogeneous goods [Moulin, H., Shenker, S., 1999. Distributive and additive costsharing of an homogeneous good. Games Econ. Behav. 27, 299–330]. The subsidy-free serial method [Moulin, H., 1995. On additive methods to share joint costs. Japan. Econ. Rev. 46, 303–332] is essentially the only distributive method meeting Ranking and Dummy. The cross-subsidizing serial method [Sprumont, Y., 1998. Ordinal cost sharing. J. Econ. Theory 81, 126–162] is the only distributive method satisfying Separability and Strong Ranking. We propose an alternative characterization of the latter method based on a strengthening of Distributivity.

Item Type:Articles
Status:Published
Refereed:Yes
Glasgow Author(s) Enlighten ID:Moulin, Professor Herve
Authors: Moulin, H., and Sprumont, Y.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Games and Economic Behavior
Publisher:Academic Press
ISSN:0899-8256
ISSN (Online):1090-2473

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