'Hydraulic' rationing

The problem of distributing a single homogeneous divisible good among a var iable set of agents, or the 'rationing problem,' is analyzed. Examples of r ationing 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 functi on, preference ordering, claim to an estate, financial record, etc. A rule of division that can be represented as a system of connected vessels is cal led hydraulic. For separable spaces of types and continuous rules, this pro perty is equivalent to obeying the fundamental axioms of symmetry and consi stency. A universal criterion is presented for deciding when a bilateral ru le has a consistent extension. (C) 2000 Elsevier Science B.V. All rights re served.