Minimum cost connection networks: Truth-telling and implementation

Jens Leth Hougaard, Mich Tvede

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)
6 Downloads (Pure)

Abstract

In the present paper we consider the allocation of costs in connection networks. Agents have connection demands in form of pairs of locations they want to have connected. Connections between locations are costly to build. The problem is to allocate costs of networks satisfying all connection demands. We use a few axioms to characterize allocation rules that truthfully implement cost minimizing networks satisfying all connection demands in a game where: (1) a central planner announces an allocation rule and a cost estimation rule; (2) every agent reports her own connection demand as well as all connection costs; (3) the central planner selects a cost minimizing network satisfying reported connection demands based on the estimated costs; and, (4) the planner allocates the true costs of the selected network. It turns out that an allocation rule satisfies the axioms if and only if relative cost shares are fixed.
Original languageEnglish
Pages (from-to)76-99
Number of pages24
JournalJournal of Economic Theory
Volume157
Early online date29 Dec 2014
DOIs
Publication statusPublished - May 2015

Keywords

  • Axiomatic characterization
  • Connection networks
  • Cost sharing
  • Implementation
  • Truth-telling

Cite this