Efficient Cost-Sharing with a Cheap Residual Claimant
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Date: 12-05-2006
Start Time:
1:00pm
End Time: 2:00pm
Speaker: Herve Moulin, Rice University
Location: Mudd 303
Abstract
The residual mechanism uses a residual claimant (RC) to share efficiently a one-commodity convex technology among an arbitrary number of potential users. For totally monotone cost functions, the (positive or negative) ratio of the budget transfer to the RC to the overall surplus in the economy goes to zero as the number n of potential users increases. The rate of convergence is at least (1/(log n)). It is polynomial for power functions C(a)=a^{p}, p>1. When the set of users increases, convergence is even faster, namely exponential in n for analytic cost functions, and hypergeometric for power functions. However the budget transfer of our mechanism is large when the cost is not smooth. If the cost function is totally monotone, the mechanism guarantees voluntary participation. It may subsidize a user with a null demand.
Bio
Herve Moulin graduated in 1971 from the Ecole Normale Supérieure in Paris, and received his Ph.D. in mathematics from the Université de Paris in 1975. He has taught at the Ecole Nationale de la Statistique et Administration Economique, University of Paris at Dauphine, Virginia Polytechnic Institute and State University, Duke University. He is presently the George Peterkin Professor of Economic Theory at Rice University in Houston, Texas. He has been a fellow of the Econometric Society since 1983. His research has been supported in part by 6 NSF grants. He has written five books and over 70 peer-reviewed articles.
His work has contributed to redefining the field of normative economics. It borrows concepts and techniques from social choice theory, non-cooperative and cooperative game theory, and implementation theory. Its goal is to invent new mechanisms—or justify existing ones—in a growing range of resource allocation problems. Examples include voting by successive veto, generalized median voting rules when preferences are single-peaked; the division of an estate (as in a divorce or inheritance); the rationing of over-demanded commodities (such as organs for transplant or seats for a popular event); the cost sharing of a technology producing a public good, an excludable public good, or a private good; the assignment or time-sharing of tasks between workers; and the scheduling of tasks in a queue. His most recent textbook, Fair Division and Collective Welfare (MIT Press, 2003), introduces the broad contributions of microeconomic analysis to fair division problems.