Three Solutions to a Simple Commons Problem

Herve Moulin

Working Papers from Rice University, Department of Economics

Abstract: We compare the equity and incentive properties of three efficient solutions to a simple problem of cooperative production with binary demands for a homogeneous service, when marginal cost is either monotonically increasing or monotonically decreasing. The solutions are the familiar competitive equilibrium with equal incomes. The Shapley value of the stand alone cooperative game, and the virtual price solution, applying the egalitarian equivalence idea to this particular model.

Date: 2001-10
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:riceco:2001-05

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