Minimum cost connection networks: truth-telling and implementation

TY - JOUR

T1 - Minimum cost connection networks

T2 - truth-telling and implementation

AU - Hougaard, Jens Leth

AU - Tvede, Mich

N1 - Available online 29 December 2014

PY - 2015/5/1

Y1 - 2015/5/1

N2 - 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.

AB - 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.

U2 - 10.1016/j.jet.2014.12.009

DO - 10.1016/j.jet.2014.12.009

M3 - Journal article

SN - 0022-0531

VL - 157

SP - 76

EP - 99

JO - Journal of Economic Theory

JF - Journal of Economic Theory

ER -