Fair Allocation of Production Externalities: Recent Results

Yves Sprumont () and Herve Moulin

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: We survey recent axiomatic results in the theory of cost-sharing. In this litterature, a method computes the individual cost shares assigned to the users of a facility for any profile of demands and any monotonic cost function. We discuss two theories taking radically different views of the asymmetries of the cost function. In the full responsibility theory, each agent is accountable for the part of the costs that can be unambiguously separated and attributed to her own demand. In the partial responsibility theory, the asymmetries of the cost function have no bearing on individual cost shares, only the differences in demand levels matter. We describe several invariance and monotonicity properties that reflect both normative and strategic concerns. We uncover a number of logical trade-offs between our axioms, and derive axiomatic characterizations of a handful of intuitive methods: in the full responsibility approach, the Shapley-Shubik, Aumann-Shapley, and subsidyfree serial methods, and in the partial responsibility approach, the cross-subsidizing serial method and the family of quasi-proportional methods.

Pages: 35 pages
Date: 2005
New Economics Papers: this item is included in nep-gth
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Citations: View citations in EconPapers (1)

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http://hdl.handle.net/1866/551 (application/pdf)

Related works:
Journal Article: Fair allocation of production externalities: recent results (2007)
Working Paper: Fair Allocation of Production Externalities: Recent Results (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:mtl:montde:2005-22

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