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Two Versions of the Tragedy of the Commons

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  • Moulin, Herve
  • Watts, Alison

Abstract

The commons are a one input-one output production process with increasing marginal cost. In the average return game, each agent chooses his input contribution and total output is shared in proportion to individual contributions. In the average cost game, each agent chooses his output share and total input cost is shared in proportion to individual demands. The tragedy is that the non cooperative equilibrium results in inefficient overutilisation of the technology. We prove formally the tragedy when preferences are convex and both goods are normal. This result has not bee proved previously on such a general preference domain. We also show that overutilisation is less severe in the average cost game than in the average return game.

Suggested Citation

  • Moulin, Herve & Watts, Alison, 1995. "Two Versions of the Tragedy of the Commons," Working Papers 95-04, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:95-04
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    References listed on IDEAS

    as
    1. Moulin, Herve & Shenker, Scott, 1992. "Serial Cost Sharing," Econometrica, Econometric Society, vol. 60(5), pages 1009-1037, September.
    2. Romano, Richard E., 1988. "Oligopolistic competition for market share via voluntary excess supply," International Journal of Industrial Organization, Elsevier, vol. 6(4), pages 447-468.
    3. Watts, Alison, 1996. "On the Uniqueness of Equilibrium in Cournot Oligopoly and Other Games," Games and Economic Behavior, Elsevier, vol. 13(2), pages 269-285, April.
    4. Roemer, J.E., 1988. "On Public Ownership," Papers 317, California Davis - Institute of Governmental Affairs.
    5. Martin Shubik, 1962. "Incentives, Decentralized Control, the Assignment of Joint Costs and Internal Pricing," Management Science, INFORMS, vol. 8(3), pages 325-343, April.
    6. Moulin Herve & Shenker Scott, 1994. "Average Cost Pricing versus Serial Cost Sharing: An Axiomatic Comparison," Journal of Economic Theory, Elsevier, vol. 64(1), pages 178-201, October.
    7. Kitch, Edmund W, 1977. "The Nature and Function of the Patent System," Journal of Law and Economics, University of Chicago Press, vol. 20(2), pages 265-290, October.
    8. Glenn C. Loury, 1979. "Market Structure and Innovation," The Quarterly Journal of Economics, Oxford University Press, vol. 93(3), pages 395-410.
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    Cited by:

    1. Leroux, Justin, 2005. "Strategyproof Profit Sharing: A Two-Agent Characterization," Working Papers 2005-04, Rice University, Department of Economics.

    More about this item

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General

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