A Proposal for Sharing Costs

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.

Cited by

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