Joint Production Games with Mixed Sharing Rules

Richard Cornes and Roger Hartley

No KERP 2002/16, Keele Economics Research Papers from Centre for Economic Research, Keele University

Abstract: We study Nash equilibria of joint production games under a mixed output sharing rule in which part of the output (the mixing parameter) is shared in proportion to inputs and the rest according to exogenously determined shares. This rule includes proportional sharing and equal sharing as special cases. We show that this game has a unique equilibrium and discuss comparative statics. When the game is large, players unanimously prefer the same value of the mixing parameter: the equilibrium value of the elasticity of production. For this value, equilibrium input and output are fully efficient. Our approach exploits the fact that payoffs in the joint production game are a function only of a player’s input and the aggregate input and has independent interest as it readily extends to other ‘‘aggregative games’’.

Keywords: Production externalities; non-cooperative games (search for similar items in EconPapers)
JEL-codes: C72 H42 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2002-09
Note: The work of the first author was supported by a Leverhulme Research Fellowship. We would like to thank Wolfgang Buchholz, Jurgen Eichberger, Gauthier Lanot, Todd Sandler, Henry Tulkens and members of seminars at the University of Melbourne and the Australian National University for helpful and encouraging comments on earlier drafts.
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Working Paper: Joint Production Games with Mixed Sharing Rules (2003)
Working Paper: Joint Production Games with Mixed Sharing Rules (2002)
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