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Minimum cost connection networks: Truth-telling and implementation

Lookup NU author(s): Professor Mich Tvede

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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.

Publication metadata

Author(s): Hougaard JL, Tvede M

Publication type: Article

Publication status: Published

Journal: Journal of Economic Theory

Year: 2015

Volume: 157

Pages: 76-99

Print publication date: 01/05/2015

Online publication date: 29/12/2014

Acceptance date: 16/12/2014

Date deposited: 30/03/2015

ISSN (print): 0022-0531

ISSN (electronic): 1095-7235

Publisher: Academic Press

URL: http://dx.doi.org/10.1016/j.jet.2014.12.009

DOI: 10.1016/j.jet.2014.12.009

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