Three Methods to Share Joint Costs or Surplus
by
Eric Friedman, Rutgers University
and 
Herv‚ Moulin, Duke University


First Version, November 1995
This Revision: September 1998


Abstract
We study cost sharing methods with variable demands of heterogeneous goods, additive in the cost function and meeting the Dummy axiom. We consider four axioms: Scale Invariance (SI); Demand Monotonicity (DM); Upper Bound for Homogeneous Goods (UBH) placing a natural cap on cost shares when goods are homogeneous; Average Cost Pricing for Homogeneous Goods (ACPH).
	The random order values based on Stand Alone costs are characterized by SI and DM.  Serial costsharing, by DM and UB; the Aumann-Shapley pricing method, by SI and ACPH.  No other combination of the four axioms is compatible with Additivity and Dummy.  

Keywords: cost sharing, additivity, demand monotonicity, scale invariance, Aumann Shapley prices, random order values, serial cost sharing
Journal of Economic Literature Classification Numbers: C71, D62, D63