Axiomatic and strategic justifications for the constrained equal benefits rule in the airport problem

Cheng-Cheng Hu, Min-Hung Tsay and Chun-Hsien Yeh

Games and Economic Behavior, 2012, vol. 75, issue 1, 185-197

Abstract: We consider the “airport problem”, which is concerned with sharing the cost of an airstrip among agents who need airstrips of different lengths. We investigate the implications of two properties, Left-endpoint Subtraction (LS) bilateral consistency and LS converse consistency, in the airport problem. First, on the basis of the two properties, we characterize the constrained equal benefits rule, which equalizes agentsʼ benefits subject to no one receiving a subsidy. Second, we introduce a 2-stage extensive form game that exploits LS bilateral consistency and LS converse consistency. We show that there is a unique subgame perfect equilibrium outcome of the game and moreover, it is the allocation chosen by the constrained equal benefits rule.

Keywords: Bilateral consistency; Converse consistency; Constrained equal benefits rule; Subgame perfect equilibrium; Airport problem (search for similar items in EconPapers)
JEL-codes: C71 C72 D63 D70 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:gamebe:v:75:y:2012:i:1:p:185-197

DOI: 10.1016/j.geb.2011.12.005

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