A Core Selection for Regulating a Single-Output Monopoly

Herve Moulin

RAND Journal of Economics, 1987, vol. 18, issue 3, 397-407

Abstract: We consider a single-output production economy in which all coalitions of agents have access to the technology. Under increasing returns to scale, the corresponding cooperative game (without side payments) is convex, and hence has a large core. We propose a core selection that is obtained by considering the lowest price of output relative to input such that the corresponding vector of indirect utilities is feasible. The constant returns equivalent allocation is feasible and achieves this utility vector. It satisfied the property of technological monotonicity: when the production possibility set expands, no agent faces a utility loss. Technological monotonicity and the core property together characterize the constant returns equivalent solution.

Date: 1987
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