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Cooperative production under diminishing marginal returns: interpreting fixed-path methods

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  • Justin Leroux

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Abstract

Fixed-path methods (FPMs) were introduced to manage situations where several individuals jointly operate a single technology (see [4]). In the production context, they consist in allocating marginal increments of output according to a proportions vector which changes along an arbitrary path. While very appealing from an incentives viewpoint under diminishing marginal returns, the asymmetry of these methods lacks solid economic interpretation. We provide such an interpretation by considering a situation where the technology to be shared results from the aggregation of private production processes. We propose a group-strategyproof mechanism under which no single agent wishes to secede from the partnership: the inverse marginal product proportions mechanism. It is the only FPM satisfying autarkic individual rationality; its path is uniquely determined by the technological contributions of the agents.

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File URL: http://hdl.handle.net/10.1007/s00355-006-0195-y
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Bibliographic Info

Article provided by Springer in its journal Social Choice and Welfare.

Volume (Year): 29 (2007)
Issue (Month): 1 (July)
Pages: 35-53

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Handle: RePEc:spr:sochwe:v:29:y:2007:i:1:p:35-53

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  1. Eric Friedman, 2004. "Strong monotonicity in surplus sharing," Economic Theory, Springer, vol. 23(3), pages 643-658, March.
  2. Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 185-216, April.
  3. Friedman, Eric J., 2002. "Strategic properties of heterogeneous serial cost sharing," Mathematical Social Sciences, Elsevier, vol. 44(2), pages 145-154, November.
  4. Sprumont, Yves, 1998. "Ordinal Cost Sharing," Journal of Economic Theory, Elsevier, vol. 81(1), pages 126-162, July.
  5. Leroux, Justin, 2004. "Strategy-proofness and efficiency are incompatible in production economies," Economics Letters, Elsevier, vol. 85(3), pages 335-340, December.
  6. Shin, Sungwhee & Suh, Sang-Chul, 1997. "Double Implementation by a Simple Game Form in the Commons Problem," Journal of Economic Theory, Elsevier, vol. 77(1), pages 205-213, November.
  7. Saijo, Tatsuyoshi, 1991. "Incentive compatibility and individual rationality in public good economies," Journal of Economic Theory, Elsevier, vol. 55(1), pages 203-212, October.
  8. Weitzman, Martin L., 1974. "Free access vs private ownership as alternative systems for managing common property," Journal of Economic Theory, Elsevier, vol. 8(2), pages 225-234, June.
  9. Moulin, Herve & Shenker, Scott, 1992. "Serial Cost Sharing," Econometrica, Econometric Society, vol. 60(5), pages 1009-37, September.
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Cited by:
  1. Leroux, Justin, 2008. "Profit sharing in unique Nash equilibrium: Characterization in the two-agent case," Games and Economic Behavior, Elsevier, vol. 62(2), pages 558-572, March.
  2. Rajnish Kumar, . "Secure Implementation in Production Economies," Departmental Working Papers 2011-02, Department of Economics, Louisiana State University.
  3. Trudeau, Christian, 2009. "Cost sharing with multiple technologies," Games and Economic Behavior, Elsevier, vol. 67(2), pages 695-707, November.
  4. Moulin, Hervé, 2010. "An efficient and almost budget balanced cost sharing method," Games and Economic Behavior, Elsevier, vol. 70(1), pages 107-131, September.

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