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Strategyproof Profit Sharing: A Two-Agent Characterization

  • Leroux, Justin

    (Rice)

Two agents jointly operate a decreasing marginal returns technology to produce a private good. We characterize the class of output-sharing rules for which the labor-supply game has a unique Nash equilibrium. It consists of two families: rules of the serial type which protect a small user from the negative externality imposed by a large user, and rules of the reverse serial type, where one agent effectively employs the other agent's labor. Exactly two rules satisfy symmetry; a result in sharp contrast with Moulin and Shenker's (Econometrica, 1992) characterization of their serial mechanism as the unique cost -sharing rule satisfying the same incentives property. We also show that the familiar stand alone test characterizes the class of fixed-path methods (Friedman, Economic Theory, 2002) under our incentives criterion.

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Paper provided by Rice University, Department of Economics in its series Working Papers with number 2005-04.

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Date of creation: May 2005
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Handle: RePEc:ecl:riceco:2005-04
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  1. Alcalde, Jose & Angel Silva, Jose, 2004. "A proposal for sharing costs," Journal of Mathematical Economics, Elsevier, vol. 40(7), pages 831-845, November.
  2. Sprumont, Y., 1996. "Ordinal Cost Sharing," Cahiers de recherche 9624, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  3. Luis C. Corchón & M. Socorro Puy, 2002. "Existence and Nash implementation of efficient sharing rules for a commonly owned technology," Social Choice and Welfare, Springer, vol. 19(2), pages 369-379, April.
  4. Cyril Téjédo & Michel Truchon, 2001. "Serial Cost Sharing in Multidimensional Contexts," Cahiers de recherche 01-07, Departement d'Economique de la Faculte d'administration à l'Universite de Sherbrooke.
  5. Satterthwaite, Mark A & Sonnenschein, Hugo, 1981. "Strategy-Proof Allocation Mechanisms at Differentiable Points," Review of Economic Studies, Wiley Blackwell, vol. 48(4), pages 587-97, October.
  6. Dasgupta, Partha S & Hammond, Peter J & Maskin, Eric S, 1979. "The Implementation of Social Choice Rules: Some General Results on Incentive Compatibility," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 185-216, April.
  7. Shin, Sungwhee & Suh, Sang-Chul, 1997. "Double Implementation by a Simple Game Form in the Commons Problem," Journal of Economic Theory, Elsevier, vol. 77(1), pages 205-213, November.
  8. Jens Leth Hougaard & Lars Thorlund-Petersen, 2000. "The stand-alone test and decreasing serial cost sharing," Economic Theory, Springer, vol. 16(2), pages 355-362.
  9. Leroux, Justin, 2004. "Strategy-proofness and efficiency are incompatible in production economies," Economics Letters, Elsevier, vol. 85(3), pages 335-340, December.
  10. Moulin, Herve, 2001. "Axiomatic Cost and Surplis-Sharing," Working Papers 2001-06, Rice University, Department of Economics.
  11. Angeles de Frutos, M., 1998. "Decreasing Serial Cost Sharing under Economies of Scale," Journal of Economic Theory, Elsevier, vol. 79(2), pages 245-275, April.
  12. Friedman, Eric J., 2002. "Strategic properties of heterogeneous serial cost sharing," Mathematical Social Sciences, Elsevier, vol. 44(2), pages 145-154, November.
  13. Hervé Moulin & Alison Watts, 1996. "Two versions of the tragedy of the commons," Review of Economic Design, Springer, vol. 2(1), pages 399-421, December.
  14. Eric Friedman, 2004. "Strong monotonicity in surplus sharing," Economic Theory, Springer, vol. 23(3), pages 643-658, March.
  15. Weitzman, Martin L., 1974. "Free access vs private ownership as alternative systems for managing common property," Journal of Economic Theory, Elsevier, vol. 8(2), pages 225-234, June.
  16. Leroux, Justin, 2005. "Strategyproof Profit Sharing in Partnerships: Improving upon Autarky," Working Papers 2005-05, Rice University, Department of Economics.
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