Econometrica: Jul 1987, Volume 55, Issue 4
Egalitarian-Equivalent Cost Sharing of a Public Good
Herve MoulinIn an economy with one public and one private good, egalitarian-equivalent cost sharing consists of finding the highest public good level x* such that consuming x* for free yields a feasible utility distribution. The corresponding feasible allocation (typically unique), called egalitarian-equivalent, is in the core of the economy. Conversely, any cost sharing method satisfying: (i) Pareto optimality, (ii) cost monotonicity (nobody suffers a utility loss if the production technology improves upon, ceteris paribus), and (iii) individual rationality (no single agent coalition objects) or (iii') no private transfers (no agent receives a positive amount of private good), must select an egalitarian-equivalent allocation in every economy.
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