Cost sharing solutions defined by non-negative eigenvectors

Begoña Subiza, José Ángel Silva-Reus () and Josep E. Peris
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José Ángel Silva-Reus: Instituto Interuniversitario de Desarrollo Social y Paz, Postal: Departamento de Métodos Cuantitativos y Teoría Económica, Universidad de Alicante, Apartado de correos 99, Ctra. San Vicente s/n, 03080 Alicante, Spain

No 13-6, QM&ET Working Papers from University of Alicante, D. Quantitative Methods and Economic Theory

Abstract: We consider a cost sharing problem, where each individual is identi ed by a characteristic (a positive real number) ci: The two main positions on how to share a common cost M are the Egalitarian and the Proportional solutions. These solutions can be obtained as the Perron's eigenvectors (right and left, respectively) of a characteristics matrix A, with rk(A) = 1; de fined from the individuals' characteristics ci: Then, the right Perron's eigenvector associated to any Levinger's transformation L(α) = α A'+(1-α )A; α є [0;1] ; provides a dif ferent solution to the cost sharing problem (from the egalitarian one, for α = 0; to the proportional one, for α = 1). We are interested in analyzing the properties of the components of these Perron's eigenvectors as (non linear) functions of the parameter α that de fines the convex combination of matrices A and A': These components de fine the solution of the cost sharing problem, that could be understood as a compromise between the egalitarian and proportional approaches. We prove that when the associated positive eigenvector is normalized, its components have a monotone behaviour in the unit interval [0;1]: Additional properties and a way of selecting a particular compromise solution are provided.

Keywords: Cost Sharing; Egalitarian; Proportional; Perrons Eigenvector; Compromise Solution (search for similar items in EconPapers)
JEL-codes: C71 D63 D71 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2013-12-10
New Economics Papers: this item is included in nep-gth
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Journal Article: Cost sharing solutions defined by non-negative eigenvectors (2015)
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