On Demand Responsiveness in Additive Cost Sharing

Herve Moulin () and Yves Sprumont
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Yves Sprumont: Universite de Montreal

Working Papers from Rice University, Department of Economics

Abstract: We propose two new axioms of demand responsiveness for additive cost sharing with variable demands. Group Monotonicity requires that if a group of agents increase their demands, not all of them pay less. Solidarity says that if agent i demands more, j should not pay more if k pays less. We explore their impact on the so-called full responsibility theory, postulating the standard Separability axiom, and on the partial responsibility theory postulating Strong Ranking, the requirement that the ranking of cost shares should never contradict that of demands. Under Separability, neither the Aumann-Shapley nor the Shapley-Shubik method is group monotonic; on the other hand, convex combinations of "nearby" fixed-path methods are group-monotonic: the subsidy-free serial method is the main example. No separable method meets Solidarity, yet restricting the axiom to submodular cost functions and adding the standard Monotonicity characterizes the fixed-flow methods, containing the Shapley-Shubik and serial methods. The combination of Strong Ranking (partial responsibility), Solidarity and Monotonicity characterizes the quasi-proportional methods, under which cost shares are proportional to 'rescaled' demands.

JEL-codes: C71 (search for similar items in EconPapers)
Date: 2003-10
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Related works:
Working Paper: On Demand Responsiveness in Additive Cost Sharing (2004)
Journal Article: On demand responsiveness in additive cost sharing (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:ecl:riceco:2003-10

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