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Strategyproof Profit Sharing: A Two-Agent Characterization

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  • Leroux, Justin

    (Rice)

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.

Suggested Citation

  • Leroux, Justin, 2005. "Strategyproof Profit Sharing: A Two-Agent Characterization," Working Papers 2005-04, Rice University, Department of Economics.
    • Handle: RePEc:ecl:riceco:2005-04
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    References listed on IDEAS

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    Cited by:

    1. Beviá, Carmen & Corchón, Luis C., 2009. "Cooperative production and efficiency," Mathematical Social Sciences, Elsevier, vol. 57(2), pages 143-154, March.
    2. Leroux, Justin, 2005. "Strategyproof Profit Sharing in Partnerships: Improving upon Autarky," Working Papers 2005-05, Rice University, Department of Economics.
    3. Albizuri, M. Josune, 2010. "The [alpha]-serial cost-sharing rule," Mathematical Social Sciences, Elsevier, vol. 60(1), pages 24-29, July.

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    JEL classification:

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

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