'Hydraulic' rationing

The problem of distributing a single homogeneous divisible good among a variable set of agents, or the 'rationing problem,' is analyzed. Examples of rationing include bankruptcy, taxation, claims settlement, cost allocation, surplus sharing, and social choice problems. Agents are described by their personal characteristics, or types. A type may be an agent's utility function, preference ordering, claim to an estate, financial record, etc. A rule of division that can be represented as a system of connected vessels is called hydraulic. For separable spaces of types and continuous rules, this property is equivalent to obeying the fundamental axioms of symmetry and consistency. A universal criterion is presented for deciding when a bilateral rule has a consistent extension. (C) 2000 Elsevier Science B.V. All rights reserved.