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Article
A Proposal for Sharing Costs
Journal of Mathematical Economics (2000)
  • Jose Alcalde, University of Alicante
  • José A. Silva, University of Alicante
Abstract
This paper proposes a cost-sharing rule for the specific case in which the agents’ demands are heterogeneous. We first examine, from a normative point of view, a cost-sharing rule introduced as the axial serial rule (AXS) by Sprumont. We introduce a property, that we call Cost-Based Equal Treatment (CBET), and we demonstrate that the unique rule verifying the Serial Principle (SP) and this property is the AXS rule. We then deal with the analysis of the agents’ strategic behavior when they are allowed to select their own production levels, in which case the total cost is then split, in accordance with the AXS rule. We show that there is only one Nash equilibrium, which is obtained from an iterative elimination of dominated strategies.
Keywords
  • Cost Sharing Rules,
  • Serial Cost Sharing,
  • Dominance Solvability.
Publication Date
2000
Citation Information
Jose Alcalde and José A. Silva. "A Proposal for Sharing Costs" Journal of Mathematical Economics Vol. 40 (2000)
Available at: http://works.bepress.com/jose_alcalde/14/