Strategic Sharing of a Costly Network

Penelope Hernandez (), Josep E. Peris and Jose Silva

No 12-10, QM&ET Working Papers from University of Alicante, D. Quantitative Methods and Economic Theory

Abstract: We s tudy minimum cost spanning tree problems for a given set of users connected to a source. We propose a rule of sharing such that each user may pay her cost for such a tree plus an additional amount to the others users . A reduction of her cost appears as a compensation from the other users. Our first result states the existence of a sharing such that no agent is willing to choose a different tree from the minimum cost tree (mcst) offered by Prim’s algorithm. Therefore, the mcst emerges as both a social and individual optimal solu tion. Given a sharing system, we implement the above solution as a subgame perfect equilibrium of a sequential game where players decide sequentially with whom to connect. Moreover , the proposed solution is at the core of the monotone cooperative game associated with a minimal cost spanning tree problem.

Keywords: Minimum cost spanning tree; cost allocation; subgame perfect equilibrium (search for similar items in EconPapers)
JEL-codes: C71 D63 D70 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2012-05-09
New Economics Papers: this item is included in nep-gth, nep-mic and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Journal Article: Strategic sharing of a costly network (2016)
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