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On Demand Responsiveness in Additive Cost Sharing

Herve Moulin () and Yves Sprumont ()

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. Both axioms are compatible in the partial responsibility theory postulating Strong Ranking, i.e., the ranking of cost shares should never contradict that of demands. The combination of Strong Ranking , Solidarity and Monotonicity characterizes the quasi-proportional methods, under which cost shares are proportional to 'rescaled' demands. The alternative full responsibility theory is based on Separability, ruling out cross-subsidization when costs are additively separable. Neither the Aumann-Shapley nor the Shapley-Shubik method is group monotonic. On the otherhand, 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 (or supermodular) cost functions leads to a characterization of the fixed-flow methods, containing the Shapley-Shubik and serial methods.

JEL-codes: C71 (search for similar items in EconPapers)
Date: 2004-05
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Journal Article: On demand responsiveness in additive cost sharing (2005) Downloads
Working Paper: On Demand Responsiveness in Additive Cost Sharing (2003) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:riceco:2004-03

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