Allocation rules on networks

Ilkilic, Rahmi and Kayi, Cagatay (2012): Allocation rules on networks. Published in: Universidad del Rosario - Facultad de Economía SERIE Documentos de Trabajo No. 118

Abstract

When allocating a resource, geographical and infrastructural constraints have to be taken into account. We study the problem of distributing a resource through a network from sources endowed with the resource to citizens with claims. A link between a source and an agent depicts the possibility of a transfer from the source to the agent. Given the supplies at each source, the claims of citizens, and the network, the question is how to allocate the available resources among the citizens.

We consider a simple allocation problem that is free of network constraints, where the total amount can be freely distributed. The simple allocation problem is a claims problem where the total amount of claims is greater than what is available. We focus on consistent and resource monotonic rules in claims problems that satisfy equal treatment of equals. We call these rules fairness principles and we extend fairness principles to allocation rules on networks. We require that for each pair of citizens in the network, the extension is robust with respect to the fairness principle. We call this condition pairwise robustness with respect to the fairness principle. We provide an algorithm and show that each fairness principle has a unique extension which is pairwise robust with respect to the fairness principle. We give applications of the algorithm for three fairness principles: egalitarianism, proportionality and equal sacrifice.

• Item Type: MPRA Paper
• Language: English
• Keywords: Networks, Claims Problems, Egalitarianism, Proportionality, Equal Sacrifice
• Subjects: D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency ; Cost-Benefit Analysis; D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D85 - Network Formation and Analysis: Theory; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q2 - Renewable Resources and Conservation > Q20 - General

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