Two Versions of the Tragedy of the Commons
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.
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|Date of creation:||1995|
|Publication status:||Published in ECONOMIC DESIGN, Vol. 2, 1997, pages 399-421|
|Contact details of provider:|| Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097|
Phone: (919) 660-1800
Fax: (919) 684-8974
Web page: http://econ.duke.edu/
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- 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.
- 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.
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