On consistency of income and cost sharing

• Published in: Socio-economic planning sciences Vol. 33; no. 3; pp. 221 - 230
• Main Authors: Forgó, Ferenc, Szidarovszky, Ferenc
• Format: Journal Article
• Language: English
• Published: Elsevier Ltd 01-09-1999; Elsevier
• Series: Socio-Economic Planning Sciences
• Subjects: Aumann-Shapley rices; Cost; Cost function; Cost prices; Cost sharing; Costs; Economic models; Economic Theory; Income; Income distribution; Income sharing; Marginal price; Prices; Profit margins; Aumann-Shapley rices; Marginal price; Income sharing; Cost sharing
• ISSN: 0038-0121; 1873-6041
• DOI: 10.1016/S0038-0121(99)00002-6

Conditions under which the Aumann–Shapley and a modified marginal income sharing mechanism lead to the same distribution of income are examined. A necessary and sufficient condition is derived and interpreted in economic terms to characterize the income functions for which the two mechanisms produce the same income shares in the case where income can always be increased by raising the performance level of any contributor. An “impossibility” theorem is stated and proved if the income function has an isolated maximum. The results translate to cost-sharing in a natural way.