Conferences at Department of Economics, University of Toronto, Canadian Economic Theory Conference 2013

Font Size:  Small  Medium  Large

Consistency requirements and pattern methods in cost sharing problems with technological cooperation

Eric Bahel, Christian Trudeau*

Last modified: 2013-04-15

Abstract


Using the discrete cost sharing model with technological cooperation, we investigate the implications of a number of consistency requirements. In a context where the enforcing authority cannot prevent agents (who seek to reduce their cost shares) from splitting or merging their demands, the methods used must make such manipulations unprofitable. The paper introduces a family of rules that are immune to these demand manipulations, the pattern methods. For each of these methods, the associated production pattern indicates how to use the different technologies in order to meet the agents' demands. Within this family, two rules stand out: the public Aumann-Shapley rule never rewards technological cooperation; and the private Aumann-Shapley rule generates the maximum technological rent for homogeneous problems. The paper also studies the sharing methods that are not affected by manipulations of the technology. A useful axiomatization of the public Aumann-Shapley rule ensues: it is the unique flow method that is immune to demand maneuvers and technology manipulations.

Full Text: PDF