Cost-Sharing under Increasing Returns: A Comparisonof Simple Mechanisms

Herve Moulin ()

No 95-19, Working Papers from Duke University, Department of Economics

Abstract: A technology with descreasing marginal costs is used by agents with equal rights. Each agent demands a quantity of output and costs are divided by means of a fixed formula. Several such mechanisms are compared for the existence of Nash equilibrium demand profiles and for the equity properties of these equilibria. Among three mechanisms, average cost pricing, the Shapley-Shubnik cost sharing and serial cost-sharing, only the latter two possess at least one Nash equilibrium at a reasonable domain of individual preferences. Only the serial cost sharing equilibria pass the equity tests of No Envy and Stand Alone cost.

JEL-codes: C72 D63 (search for similar items in EconPapers)
Date: 1995

Published in GAMES AND ECONOMIC BEHAVIOR, Vol. 13, 1996, pages 225-251

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Journal Article: Cost Sharing under Increasing Returns: A Comparison of Simple Mechanisms (1996)
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