Three methods to share joint costs or surplus

Friedman, E. and Moulin, H. (1999) Three methods to share joint costs or surplus. Journal of Economic Theory, 87(2), pp. 275-312. (doi: 10.1006/jeth.1999.2534)

Abstract

We study cost sharing methods with variable demands of heterogeneous goods, additive in the cost function and meeting the dummy axiom. We consider four axioms: scale invariance (SI); demand monotonicity (DM); upper bound for homogeneous goods (UBH) placing a natural cap on cost shares when goods are homogeneous; average cost pricing for homogeneous goods (ACPH). The random order values based on stand alone costs are characterized by SI and DM. Serial costsharing, by DM and UB; the Aumann–Shapley pricing method, by SI and ACPH. No other combination of the four axioms is compatible with additivity and dummy.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Moulin, Professor Herve
• Authors: Friedman, E., and Moulin, H.
• College/School: College of Social Sciences > Adam Smith Business School > Economics
• Journal Name: Journal of Economic Theory
• ISSN: 0022-0531
• ISSN (Online): 1095-7235