Incremental Cost Sharing in Chains and Fixed Trees

Jens Hougaard () and Mich Tvede

No 02_2011, MSAP Working Paper Series from University of Copenhagen, Department of Food and Resource Economics

Abstract: In this paper we consider a family of cost allocation rules for which agents pay a share of their incremental cost as well as of any ‘debt’ from prior agents. This family encompasses the Bird rule and the free riding rule (where terminal agents pay everything) as the two extreme cases. By axiomatic characterization it is demonstrated that a distinguishing feature of this family is that payments are independent of both the costs and the number of downstream agents.

Keywords: Cost allocation; Axiomatic characterization; Bird allocation; Incremental cost sharing (search for similar items in EconPapers)
Pages: 12 pages
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:foi:msapwp:02_2011

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