Cooperative production under diminishing marginal returns: Interpreting fixed-path methods

Justin Leroux

No 06-10, Cahiers de recherche from HEC Montréal, Institut d'économie appliquée

Abstract: Fixed-path methods (FPMs) were introduced to manage situations where several individuals jointly operate a single technology (see [4]). In the production context, they consist in allocating marginal increments of output according to a proportions vector which changes along an arbitrary path. While very appealing from an incentives viewpoint under diminishing marginal returns, the asymmetry of these methods lacks solid economic interpretation. We provide such an interpretation by considering a situation where the technology to be shared results from the aggregation of private production processes. We propose a group-strategyproof mechanism under which no single agent wishes to secede from the partnership: the inverse marginal product proportions mechanism. It is the only FPM satisfying autarkic individual rationality; its path is uniquely determined by the technological contributions of the agents.

Keywords: Autarky; incentive compatibility; cooperative production; surplus sharing; serial rule; path methods. (search for similar items in EconPapers)
JEL-codes: C72 D23 D62 D71 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2006-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Cooperative production under diminishing marginal returns: interpreting fixed-path methods (2007)
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