Equity Basis Selection in Allocation Environments

David Aadland (aadland@uwyo.edu) and Van Kolpin

MPRA Paper from University Library of Munich, Germany

Abstract: The successful formation and long-term stability of a cooperative venture is often linked to the perceived fairness of the associated cost or resource allocation. In particular, the effectiveness of such collaborations can be hampered by the lack of a consensus view on what basis should be used for gauging an allocation’s “fairness.” Standards of equity in traditional cost-sharing applications could be assessed on many dimensions: per capita, per unit of demand, or per unit of revenue, to mention a few. This multiplicity of logically compelling “equity bases” is a feature common to many practical cost-sharing applications. Our analysis shows that features of the allocation environment are capable of explaining a substantial amount of the variation in the equity bases employed in practice and are consistent with the axiomatic principles of collective behavior.

Keywords: cooperative games; cost allocation; equity; probit model (search for similar items in EconPapers)
JEL-codes: C25 C71 D63 (search for similar items in EconPapers)
Date: 2008-03-01
New Economics Papers: this item is included in nep-gth
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