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Strategyproof Profit Sharing: A Two-Agent Characterization

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Leroux, Justin (Rice)

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Abstract

Two agents jointly operate a decreasing marginal returns technology to produce a private good. We characterize the class of output-sharing rules for which the labor-supply game has a unique Nash equilibrium. It consists of two families: rules of the serial type which protect a small user from the negative externality imposed by a large user, and rules of the reverse serial type, where one agent effectively employs the other agent's labor. Exactly two rules satisfy symmetry; a result in sharp contrast with Moulin and Shenker's (Econometrica, 1992) characterization of their serial mechanism as the unique cost -sharing rule satisfying the same incentives property. We also show that the familiar stand alone test characterizes the class of fixed-path methods (Friedman, Economic Theory, 2002) under our incentives criterion.

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Paper provided by Rice University, Department of Economics in its series Working Papers with number 2005-04.

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Date of creation: May 2005
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Handle: RePEc:ecl:riceco:2005-04

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C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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  1. 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. [Downloadable!] (restricted)
  2. Friedman, Eric J., 2002. "Strategic properties of heterogeneous serial cost sharing," Mathematical Social Sciences, Elsevier, vol. 44(2), pages 145-154, November. [Downloadable!] (restricted)
  3. Sprumont, Yves, 1998. "Ordinal Cost Sharing," Journal of Economic Theory, Elsevier, vol. 81(1), pages 126-162, July. [Downloadable!] (restricted)
  4. Alcalde, Jose & Angel Silva, Jose, 2004. "A proposal for sharing costs," Journal of Mathematical Economics, Elsevier, vol. 40(7), pages 831-845, November. [Downloadable!] (restricted)
  5. Luis C. Corchón & M. Socorro Puy, 2002. "Existence and Nash implementation of efficient sharing rules for a commonly owned technology," Social Choice and Welfare, Springer, vol. 19(2), pages 369-379. [Downloadable!] (restricted)
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  6. Leroux, Justin, 2005. "Strategyproof Profit Sharing in Partnerships: Improving upon Autarky," Working Papers 2005-05, Rice University, Department of Economics. [Downloadable!]
  7. Tejedo, Cyril & Truchon, Michel, 2002. "Serial cost sharing in multidimensional contexts," Mathematical Social Sciences, Elsevier, vol. 44(3), pages 277-299, December. [Downloadable!] (restricted)
  8. 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, Blackwell Publishing, vol. 46(2), pages 185-216, April. [Downloadable!] (restricted)
  9. Eric Friedman, 2004. "Strong monotonicity in surplus sharing," Economic Theory, Springer, vol. 23(3), pages 643-658, March. [Downloadable!] (restricted)
  10. 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. [Downloadable!] (restricted)
  11. Hervé Moulin & Alison Watts, 1996. "Two versions of the tragedy of the commons," Review of Economic Design, Springer, vol. 2(1), pages 399-421, December. [Downloadable!] (restricted)
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  12. Moulin, Herve, 2002. "Axiomatic cost and surplus sharing," Handbook of Social Choice and Welfare, in: K. J. Arrow & A. K. Sen & K. Suzumura (ed.), Handbook of Social Choice and Welfare, edition 1, volume 1, chapter 6, pages 289-357 Elsevier. [Downloadable!] (restricted)
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  1. Carmen Beviá & Luis C. Corchón, 2007. "Cooperative Production and Efficiency," UFAE and IAE Working Papers 696.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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