Fair allocation of production externalities: recent results

Herve Moulin and Yves Sprumont ()

Revue d'économie politique, 2007, vol. 117, issue 1, 7-36

Abstract: We survey recent axiomatic results in the theory of cost-sharing. A method assigns cost shares to the users of a facility for any profile of demands and any monotonic cost function. We discuss two radically different views of the asymmetries of the cost function. Under full responsibility, each agent is accountable for the part of the costs that can be unambiguously separated and attributed to her own demand. Under partial responsibility, the asymmetries of the cost function have no bearing on individual cost shares, only the differences in demand levels matter. We describe several invariance and monotonicity properties that reflect both normative and strategic concerns. We uncover a number of logical trade-offs between our axioms, and derive axiomatic characterizations: in the full responsibility approach, of the Shapley-Shubik, Aumann-Shapley, and subsidy-free serial methods; in the partial responsibility approach, of the cross-subsidizing serial method and of the family of quasi-proportional methods.

Keywords: cost-sharing methods; fairness; responsibility (search for similar items in EconPapers)
Date: 2007
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Citations: View citations in EconPapers (12)

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Related works:
Working Paper: Fair Allocation of Production Externalities: Recent Results (2005)
Working Paper: Fair Allocation of Production Externalities: Recent Results (2005)
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