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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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Suggested Citation

  • Moulin, Herve, 1996. "Cost Sharing under Increasing Returns: A Comparison of Simple Mechanisms," Games and Economic Behavior, Elsevier, vol. 13(2), pages 225-251, April.
  • Handle: RePEc:eee:gamebe:v:13:y:1996:i:2:p:225-251
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    Cited by:

    1. Cyril Téjédo & Michel Truchon, 2002. "Monotonicity and Bounds for Cost Shares under the Path Serial Rule," CIRANO Working Papers 2002s-43, CIRANO.
    2. Federico Quartieri, 2013. "Coalition-proofness under weak and strong Pareto dominance," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 40(2), pages 553-579, February.
    3. repec:spr:compst:v:64:y:2006:i:3:p:429-444 is not listed on IDEAS
    4. 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.
    5. Qiaohai (Joice) Hu & Leroy B. Schwarz & Nelson A. Uhan, 2012. "The Impact of Group Purchasing Organizations on Healthcare-Product Supply Chains," Manufacturing & Service Operations Management, INFORMS, vol. 14(1), pages 7-23, January.
    6. Flam, S. D. & Jourani, A., 2003. "Strategic behavior and partial cost sharing," Games and Economic Behavior, Elsevier, vol. 43(1), pages 44-56, April.
    7. 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.
    8. 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.
    9. Tejedo, Cyril & Truchon, Michel, 2002. "Serial cost sharing in multidimensional contexts," Mathematical Social Sciences, Elsevier, vol. 44(3), pages 277-299, December.
    10. Roma Paolo & Perrone Giovanni, 2010. "Generic Advertising, Brand Advertising and Price Competition: An Analysis of Free-Riding Effects and Coordination Mechanisms," Review of Marketing Science, De Gruyter, vol. 8(1), pages 1-29, October.
    11. Cyril Téjédo & Michel Truchon, 2001. "Serial Cost Sharing in Multidimensional Contexts (May 2002 revised version)," CIRANO Working Papers 2001s-68, CIRANO.
    12. Moulin, Herve, 1995. "On Additive Methods to Share Joint Costs," Mathematical Social Sciences, Elsevier, vol. 30(1), pages 98-99, August.
    13. Maurice Koster, 2006. "Heterogeneous cost sharing, the directional serial rule," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 64(3), pages 429-444, December.
    14. Hougaard, Jens Leth & Thorlund-Petersen, Lars, 2001. "Mixed serial cost sharing," Mathematical Social Sciences, Elsevier, vol. 41(1), pages 51-68, January.

    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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