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Incremental Cost Sharing in Chains and Fixed Trees

Author

Listed:
  • Jens Leth Hougaard

    (Department of Food and Resource Economics, University of Copenhagen)

  • Mich Tvede

    (Department of Economics, University of Copenhagen)

Abstract

In this paper we consider a family of cost allocation rules for which agents pay a share of their incremental cost as well as of any ‘debt’ from prior agents. This family encompasses the Bird rule and the free riding rule (where terminal agents pay everything) as the two extreme cases. By axiomatic characterization it is demonstrated that a distinguishing feature of this family is that payments are independent of both the costs and the number of downstream agents.

Suggested Citation

  • Jens Leth Hougaard & Mich Tvede, 2011. "Incremental Cost Sharing in Chains and Fixed Trees," MSAP Working Paper Series 02_2011, University of Copenhagen, Department of Food and Resource Economics.
    • Handle: RePEc:foi:msapwp:02_2011
    as

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    File URL: http://okonomi.foi.dk/workingpapers/MSAPpdf/MSAP2011/MSAP_WP02_2011.pdf
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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