Three Methods to Share Joint Costs or Surplus

Eric Friedman and Herve Moulin ()

No 95-38, Working Papers from Duke University, Department of Economics

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.

JEL-codes: C71 D62 D63 (search for similar items in EconPapers)
Date: 1995
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Published in JOURNAL OF ECONOMIC THEORY, Vol. 87, 1999, pages 275-331

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