Cost-Sharing under Increasing Returns: A Comparisonof Simple Mechanisms
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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|Date of creation:||1995|
|Date of revision:|
|Publication status:||Published in GAMES AND ECONOMIC BEHAVIOR, Vol. 13, 1996, pages 225-251|
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