Incremental Cost Sharing: Characterization by Strategy-Proofness

Herve Moulin

No 95-28, Working Papers from Duke University, Department of Economics

Abstract: Each one of n users consumes an idiosyncratic commodity produced in indivisible units. The n commodities are jointly produced by a central facility and the total cost must be shared by the users. Under convex preferences and increasing marginal costs, we characterize the set of incentive compatible (coalition strategy- proof) cost sharing mechanisms. These mechanisms generalize the familiar incremental method where agent 1 pays his Stand Alone cost, agent 2 pays the incremental cost (to serve agents 1 and 2 instead of agent 1), and so on. When the commodities become more and more divisible, some of these mechanisms treat agents symmetrically.

Date: 1995
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Published in SOCIAL CHOICE AND WELFARE, Vol. 16, 1999, pages 279-320

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