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Cost-Sharing under Increasing Returns: A Comparisonof Simple Mechanisms


  • Moulin, Herve


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.

Suggested Citation

  • Moulin, Herve, 1995. "Cost-Sharing under Increasing Returns: A Comparisonof Simple Mechanisms," Working Papers 95-19, Duke University, Department of Economics.
  • Handle: RePEc:duk:dukeec:95-19

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    References listed on IDEAS

    1. Bergstrom, Theodore C & Rubinfeld, Daniel L & Shapiro, Perry, 1982. "Micro-Based Estimates of Demand Functions for Local School Expenditures," Econometrica, Econometric Society, vol. 50(5), pages 1183-1205, September.
    2. Paul R. Portney, 1994. "The Contingent Valuation Debate: Why Economists Should Care," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 3-17, Fall.
    3. Richard T. Carson & W. Michael Hanemann, & Raymond J. Kopp & Jon A. Krosnick & Robert C. Mitchell & Stanley Presser & Paul A. Rudd & V. Kerry Smith & Michael Conaway & Kerry Martin, 1997. "Temporal Reliability of Estimates from Contingent Valuation," Land Economics, University of Wisconsin Press, vol. 73(2), pages 151-163.
    4. Richard T. Carson, 2011. "Contingent Valuation," Books, Edward Elgar Publishing, number 2489.
    5. Peter A. Diamond & Jerry A. Hausman, 1994. "Contingent Valuation: Is Some Number Better than No Number?," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 45-64, Fall.
    6. W. Michael Hanemann, 1994. "Valuing the Environment through Contingent Valuation," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 19-43, Fall.
    7. Carson, R.T. & Mitchell, R.C. & Hanemann, W.M. & Kopp, R.J. & Presser, S. & Ruud, P.A., 1992. "A Contingent Valuation Study of Lost Passive Use Values Resulting From the Exxon Valdez Oil Spill," MPRA Paper 6984, University Library of Munich, Germany.
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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. 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.
    3. Tejedo, Cyril & Truchon, Michel, 2002. "Serial cost sharing in multidimensional contexts," Mathematical Social Sciences, Elsevier, vol. 44(3), pages 277-299, December.
    4. 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.
    5. Cyril Téjédo & Michel Truchon, 2001. "Serial Cost Sharing in Multidimensional Contexts (May 2002 revised version)," CIRANO Working Papers 2001s-68, CIRANO.
    6. Moulin, Herve, 1995. "On Additive Methods to Share Joint Costs," Mathematical Social Sciences, Elsevier, vol. 30(1), pages 98-99, August.
    7. 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.
    8. Hougaard, Jens Leth & Thorlund-Petersen, Lars, 2001. "Mixed serial cost sharing," Mathematical Social Sciences, Elsevier, vol. 41(1), pages 51-68, January.
    9. 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.
    10. repec:spr:compst:v:64:y:2006:i:3:p:429-444 is not listed on IDEAS
    11. 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.
    12. Flam, S. D. & Jourani, A., 2003. "Strategic behavior and partial cost sharing," Games and Economic Behavior, Elsevier, vol. 43(1), pages 44-56, April.
    13. 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.
    14. 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.

    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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