Cost Share Adjustment Processes for Cooperative Group Decisions About Shared Goods: A Design Approach

Edna Tusak Loehman (), Richard Kiser () and Stephen Rassenti
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Edna Tusak Loehman: Purdue University
Richard Kiser: University of Arizona

Group Decision and Negotiation, 2014, vol. 23, issue 5, No 7, 1085-1126

Abstract: Abstract For group decision about shared goods, the nature of the shared good and how its cost is to be shared among group members must be determined. Complexity arises from heterogeneity in preferences and endowments and nonlinear cost. To facilitate group decision, this paper proposes special type of group decision support system, a cost share adjustment process (CSAP), in which cost shares are adjusted iteratively via algorithmic rules until unanimity is reached, ideally producing a socially optimal, cost feasible, and fair outcome. In contrast to public good literature, our designs apply for situations of nonlinear cost, with economies of scale and fixed costs. In response to impossibility theorems, a design approach is developed: design elements for CSAPs include message space, cost allocation and adjustment rules, controllers, and incentive rules, with many possibilities for specifying a process. Simulation and economic experiment are employed to compare alternative designs, in particular highlighting the incentive effects of message space. As simulation and experiment both indicate, complicated cost allocation rules for incentive purposes may impede locating group agreement. Instead, economic experiments show that unanimity Approval Voting can mitigate the effects of strategic behavior.

Keywords: Shared goods; Cost sharing; Cost share equilibrium; Public goods; Economic institutions; Experimental economics (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10726-013-9342-x

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