The Incidence of Cost-Minimizing Rebalancing

Total-cost minimization at fixed net positions is not the same as participant-by-participant acceptability. A reduction, which shrinks existing claims and posts none, lowers every party's carrying cost, so conservative compression is a Pareto improvement for every convex cost. Unrestricted rebalancing, the cost-minimal point of the whole fiber, can save more and still raise the cost of a party who owed nothing and was owed nothing. On the triangle a single unit debt costs 1/2; the unconstrained minimum is 1/3; every other point of the fiber, and in particular that minimum, charges the third party; the only individually rational move is to do nothing. The gap 1/6 is the price of requiring participation. On every simple cycle, we derive the exact participation price and each party's gain or loss. On the triangle we determine the entire cost frontier under a permitted bystander burden, and the minimum balanced compensation that restores individual acceptability. A party with a period budget and a reserve makes that price operational: conservative reductions preserve every party's budget feasibility, but repeated implementation of the cost-minimizing state can push a previously viable bystander through its budget and exhaust its reserve. The mechanism is a convex cost share with no defaults, and it is located beside the results that compression can harm through default contagion.