On the theory of cost sharing (Q2276858)

Consider an economy with a public good and an exogenous scheme \(\phi\) of sharing its cost among individuals. Allocations which are obtainable under \(\phi\) are called \(\phi\)-allocations. Proposition 2.4 states conditions under which a unique and efficient \(\phi\)-allocation exists. By adapting a concept of \textit{E. A. Pazner} and \textit{D. Schmeidler} [Q. J. Econ. 92, 671-687 (1978)] \(\phi\)-egalitarian-equivalent allocations (``\(\phi\)-EEA'') are defined next. \(\phi\)-EEA are shown to exist and to be efficient with respect to the set \(\Phi\) of \(\phi\)-allocations. The authors finally discuss the concept of \(\phi\)-cost sharing equilibria (``\(\phi\)-CSE''). Such \(\phi\)-CSE are egalitarian-equivalent and efficient in the unrestricted sense. In contrast to \(\phi\)-EEA, they need not however exist. \(\phi\)-CSE are shown to belong to the core of the economy. Moreover, they are implementable as strong equilibria of an associated non-cooperative game.