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Scale economies, consistent conjectures and teams

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  • Heywood, John S.
  • McGinty, Matthew

Abstract

This paper models the behavior of team members in a consistent conjectures equilibrium. When subject to scale economies, team members produce more than Nash and when subject to scale diseconomies, they produce less than Nash. Moreover, even when effort levels of team members are perfect substitutes in production, they can be strategic complements in the face of scale economies. Finally, with sufficient scale economies, the complementarity eliminates free-riding and the team optimum is obtained.

Suggested Citation

  • Heywood, John S. & McGinty, Matthew, 2012. "Scale economies, consistent conjectures and teams," Economics Letters, Elsevier, vol. 117(3), pages 566-568.
  • Handle: RePEc:eee:ecolet:v:117:y:2012:i:3:p:566-568
    DOI: 10.1016/j.econlet.2012.07.027
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    References listed on IDEAS

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    1. Friedman, James, 1993. "Oligopoly theory," Handbook of Mathematical Economics,in: K. J. Arrow & M.D. Intriligator (ed.), Handbook of Mathematical Economics, edition 4, volume 2, chapter 11, pages 491-534 Elsevier.
    2. Falk, Armin & Fischbacher, Urs, 2006. "A theory of reciprocity," Games and Economic Behavior, Elsevier, vol. 54(2), pages 293-315, February.
    3. Perloff,Jeffrey M. & Karp,Larry S. & Golan,Amos, 2007. "Estimating Market Power and Strategies," Cambridge Books, Cambridge University Press, number 9780521011143.
    4. Sugden, Robert, 1985. "Consistent conjectures and voluntary contributions to public goods: why the conventional theory does not work," Journal of Public Economics, Elsevier, vol. 27(1), pages 117-124, June.
    5. Cabral, Luis M. B., 1995. "Conjectural variations as a reduced form," Economics Letters, Elsevier, vol. 49(4), pages 397-402, October.
    6. Cornes, Richard & Sandler, Todd, 1985. "On the consistency of conjectures with public goods," Journal of Public Economics, Elsevier, vol. 27(1), pages 125-129, June.
    7. Cox, James C. & Friedman, Daniel & Gjerstad, Steven, 2007. "A tractable model of reciprocity and fairness," Games and Economic Behavior, Elsevier, vol. 59(1), pages 17-45, April.
    8. Bresnahan, Timothy F, 1981. "Duopoly Models with Consistent Conjectures," American Economic Review, American Economic Association, vol. 71(5), pages 934-945, December.
    9. Adams, Christopher P., 2006. "Optimal team incentives with CES production," Economics Letters, Elsevier, vol. 92(1), pages 143-148, July.
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    Cited by:

    1. Gelves, Alejandro & McGinty, Matthew, 2016. "International environmental agreements with consistent conjectures," Journal of Environmental Economics and Management, Elsevier, vol. 78(C), pages 67-84.
    2. John S. Heywood & Zheng Wang, 2016. "Consistent location conjectures under spatial price discrimination," Journal of Economics, Springer, vol. 117(2), pages 167-180, March.

    More about this item

    Keywords

    Team production; Scale economies; Consistent conjectures;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General

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