Cost sharing: Efficiency and implementation

Todd R. Kaplan, David Wettstein

Research output: Contribution to journalArticlepeer-review

2 Scopus citations

Abstract

We study environments where a production process is jointly shared by a finite group of agents. The social decision involves the determination of input contribution and output distribution. We define a competitive solution when there is decreasing-returns-to-scale which leads to a Pareto optimal outcome. Since there is a finite number of agents, the competitive solution is prone to manipulation. We construct a mechanism for which the set of Nash equilibria coincides with the set of competitive solution outcomes. We define a marginal-cost-pricing equilibrium (MCPE) solution for environments with increasing returns to scale. These solutions are Pareto optimal under certain conditions. We construct another mechanism that realizes the MCPE.

Original languageEnglish
Pages (from-to)489-502
Number of pages14
JournalJournal of Mathematical Economics
Volume32
Issue number4
DOIs
StatePublished - 1 Jan 1999

Keywords

  • Cost sharing
  • D51
  • D61
  • D78
  • Increasing returns to scale
  • Marginal-cost-pricing equilibrium

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