Demand Compatible Equitable Cost Sharing Prices

Abstract

We propose here a new approach for equitable cost sharing pricing based upon the Shapley value for nonatomic games. However, it is shown that the proposed price mechanism can be justified on economic terms since it is uniquely determined by a set of axioms involving only cost functions and quantities consumed and not any notion of game theory. Moreover, taking into account the utilities of the consumers, one can prove the existence of an equilibrium under this price mechanism for a general class of cost functions. This approach has the advantage of not involving any interpersonal comparisons of utilities.

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