Cost-sharing under increasing returns: a comparison of simple mechanisms

Moulin, H. (1996) Cost-sharing under increasing returns: a comparison of simple mechanisms. Games and Economic Behavior, 13(2), pp. 225-251. (doi: 10.1006/game.1996.0035)

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A technology with decreasing marginal costs is used by agents with equal rights. Each agent demands a quantity of output and costs are divided by means of a fixed formula. Several such mechanisms are compared for the existence of Nash equilibrium demand profiles and for the equity properties of these equilibria. Among three mechanisms, average cost pricing, the Shapley–Shubik cost sharing, and serial cost-sharing, only the latter two possess at least one Nash equilibrium on a reasonable domain of individual preferences. Only the serial cost sharing equilibria pass the equity tests of No Envy and Stand Alone cost.Journal of Economic LiteratureClassification Numbers: C72, D63.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Moulin, Professor Herve
Authors: Moulin, H.
College/School:College of Social Sciences > Adam Smith Business School > Economics
Journal Name:Games and Economic Behavior
Publisher:Academic Press
ISSN (Online):1090-2473

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