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An Axiomatic Approach to Cost Allocation for Public Investment

Author

Listed:
  • E. Loehman

    (University of Florida (Gainesville))

  • A. Whinston

    (Purdue University)

Abstract

A previously presented charge scheme for public investments is derived here from a set of axioms. It is argued that these axioms embody a definition of equity in allocating the costs of a public facility and could serve as a constitution which would be agreed on by users of a public facility. Consideration is also given to optimality properties of the charge scheme in encouraging the formation of coalitions to undertake joint investments.

Suggested Citation

  • E. Loehman & A. Whinston, 1974. "An Axiomatic Approach to Cost Allocation for Public Investment," Public Finance Review, , vol. 2(2), pages 236-250, April.
    • Handle: RePEc:sae:pubfin:v:2:y:1974:i:2:p:236-250
    DOI: 10.1177/109114217400200205
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    References listed on IDEAS

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    1. Edna Loehman & Andrew Whinston, 1971. "A New Theory of Pricing and Decision-Making for Public Investment," Bell Journal of Economics, The RAND Corporation, vol. 2(2), pages 606-625, Autumn.
    2. Baumol, William J & Bradford, David F, 1970. "Optimal Departures from Marginal Cost Pricing," American Economic Review, American Economic Association, vol. 60(3), pages 265-283, June.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. José Alcalde & José Angel Silva, 2000. "- A Procedure For Sharing Recycling Costs," Working Papers. Serie AD 2000-14, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    2. Jerry Green, 2005. "Compensatory transfers in two-player decision problems," International Journal of Game Theory, Springer;Game Theory Society, vol. 33(2), pages 159-180, June.
    3. Vanovermeire, Christine & Sörensen, Kenneth, 2014. "Measuring and rewarding flexibility in collaborative distribution, including two-partner coalitions," European Journal of Operational Research, Elsevier, vol. 239(1), pages 157-165.
    4. Radhakrishnan, Suresh & Balachandran, Kashi R., 1995. "Stochastic choice hazard and incentives in a common service facility," European Journal of Operational Research, Elsevier, vol. 81(2), pages 324-335, March.
    5. Friedman, Eric & Moulin, Herve, 1999. "Three Methods to Share Joint Costs or Surplus," Journal of Economic Theory, Elsevier, vol. 87(2), pages 275-312, August.
    6. Zara, Stefano & Dinar, Ariel & Patrone, Fioravante, 2006. "Cooperative game theory and its application to natural, environmental, and water resource issues : 2. application to natural and environmental resources," Policy Research Working Paper Series 4073, The World Bank.
    7. Mariusz Kaleta & Eugeniusz Toczyłowski, 2009. "A cost allocation framework for LP and GLP games," Operations Research and Decisions, Wroclaw University of Science and Technology, Faculty of Management, vol. 19(4), pages 27-46.
    8. VANOVERMEIRE, Christine & SÖRENSEN, Kenneth, 2013. "Integration of the cost allocation in the optimization of collaborative bundling," Working Papers 2013019, University of Antwerp, Faculty of Business and Economics.
    9. Moulin, Herve, 2002. "Axiomatic cost and surplus sharing," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 6, pages 289-357, Elsevier.
    10. VANOVERMEIRE, Christine & SÖRENSEN, Kenneth & VAN BREEDAM, Alex & VANNIEUWENHUYSE, Bart & VERSTREPEN, Sven, 2012. "Efficient supply chains through flexible horizontal collaboration," Working Papers 2012007, University of Antwerp, Faculty of Business and Economics.
    11. Alcalde, Jose & Angel Silva, Jose, 2004. "A proposal for sharing costs," Journal of Mathematical Economics, Elsevier, vol. 40(7), pages 831-845, November.
    12. Loehman, Edna & Dinar, Ariel, 1992. "Cooperative Technology Solutions to Externality Problems: The Case of Irrigation Water," Working Papers 232418, University of California, Davis, Department of Agricultural and Resource Economics.
    13. VANOVERMEIRE, Christine & SÖRENSEN, Kenneth, 2013. "Measuring and rewarding flexibility in collaborative distribution, including two-partner coalitions," Working Papers 2013017, University of Antwerp, Faculty of Business and Economics.
    14. Vanovermeire, Christine & Sörensen, Kenneth, 2014. "Integration of the cost allocation in the optimization of collaborative bundling," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 72(C), pages 125-143.
    15. Sprumont, Yves, 2000. "Coherent Cost-Sharing Rules," Games and Economic Behavior, Elsevier, vol. 33(1), pages 126-144, October.
    16. Edna T. Loehman, 2009. "Voluntary Cost-Sharing for Environmental Risk Reduction: A Pollution Abatement Case Study," Group Decision and Negotiation, Springer, vol. 18(4), pages 349-368, July.

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