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Cost Sharing under Increasing Returns: A Comparison of Simple Mechanisms

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  • Moulin, Herve

Abstract

A technology with descreasing 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-Shubnik cost sharing and serial cost-sharing, only the latter two possess at least one Nash equilibrium at a reasonable domain of individual preferences. Only the serial cost sharing equilibria pass the equity tests of No Envy and Stand Alone cost.

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Bibliographic Info

Article provided by Elsevier in its journal Games and Economic Behavior.

Volume (Year): 13 (1996)
Issue (Month): 2 (April)
Pages: 225-251

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Handle: RePEc:eee:gamebe:v:13:y:1996:i:2:p:225-251

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Web page: http://www.elsevier.com/locate/inca/622836

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Cited by:
  1. Truchon, Michel & Téjédo, Cyril, 2002. "Monotonicity and Bounds for Cost Shares under the Path Serial Rule," Cahiers de recherche 0203, Université Laval - Département d'économique.
  2. Koster, Maurice & Tijs, Stef & Borm, Peter, 1998. "Serial cost sharing methods for multi-commodity situations," Mathematical Social Sciences, Elsevier, vol. 36(3), pages 229-242, December.
  3. Flam, S. D. & Jourani, A., 2003. "Strategic behavior and partial cost sharing," Games and Economic Behavior, Elsevier, vol. 43(1), pages 44-56, April.
  4. Koster, M., 2005. "Cost Sharing, Differential Games, and the Moulin-Shenker Rule," CeNDEF Working Papers 05-07, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  5. Tejedo, Cyril & Truchon, Michel, 2002. "Serial cost sharing in multidimensional contexts," Mathematical Social Sciences, Elsevier, vol. 44(3), pages 277-299, December.
  6. Koster, M.A.L., 1998. "Multi-Service Serial Cost Sharing: A Characterization of the Moulin-Shenker Rule," Discussion Paper 1998-06, Tilburg University, Center for Economic Research.
  7. Cyril Téjédo & Michel Truchon, 2001. "Serial Cost Sharing in Multidimensional Contexts (May 2002 revised version)," CIRANO Working Papers 2001s-68, CIRANO.
  8. Koster, M.A.L., 1998. "Multi-Service Serial Cost Sharing: An Incompatibility with Smoothness," Discussion Paper 1998-122, Tilburg University, Center for Economic Research.
  9. Hougaard, Jens Leth & Thorlund-Petersen, Lars, 2001. "Mixed serial cost sharing," Mathematical Social Sciences, Elsevier, vol. 41(1), pages 51-68, January.

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