Stable cost sharing in production allocation games

Eric Bahel () and Christian Trudeau

No 1402, Working Papers from University of Windsor, Department of Economics

Abstract: Suppose that a group have demands for some good. Each one of them owns a technology to produce the good, with these technologies varying in their effectiveness. We consider technologies exhibiting either increasing return to scale (IRS) or decreasing returns to scale (DRS). In each case, we solve the issue of the efficient allocation of the production between the agents. In the case of IRS, we prove that it is always efficient to centralize the production of the good, whereas efficiency in the case of DRS typically requires to spread the production. We then show that there exist stable cost sharing mechanisms whether we have IRS or DRS. Finally, we characterize a family of stable mechanisms exhibiting no price discrimination (agents are charged the same price for each unit demanded). Under some specific circumstances, our method generates the full core of the problem.

Keywords: cost sharing; efficiency; stability; production allocation; returns to scale (search for similar items in EconPapers)
JEL-codes: C71 D63 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2014-09
New Economics Papers: this item is included in nep-ger and nep-gth
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://web2.uwindsor.ca/economics/RePEc/wis/pdf/1402.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: Stable cost sharing in production allocation games (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:wis:wpaper:1402

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