Individual Pricing Cannot Handle Variable Demands: Budget Balance Requires Acknowledging Interdependence
7 Pages Posted: 1 Aug 2016
Date Written: May 26, 2016
Budget balance cannot be achieved if rates depend upon individual agents' own consumption only, which we refer to as individualistic pricing. Thus, interdependence between agents should be accounted for, for example by taking total consumption into account explicitly.
Keywords: Cost sharing, budget balance, non-linear costs, externalities
JEL Classification: D62
Suggested Citation: Suggested Citation