## Abstract

We study environments where a production process is jointly shared by a finite group of agents. The social decision involves the determination of input contribution and output distribution. We define a competitive solution when there is decreasing-returns-to-scale which leads to a Pareto optimal outcome. Since there is a finite number of agents, the competitive solution is prone to manipulation. We construct a mechanism for which the set of Nash equilibria coincides with the set of competitive solution outcomes. We define a marginal-cost-pricing equilibrium (MCPE) solution for environments with increasing returns to scale. These solutions are Pareto optimal under certain conditions. We construct another mechanism that realizes the MCPE.

Original language | English |
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Pages (from-to) | 489-502 |

Number of pages | 14 |

Journal | Journal of Mathematical Economics |

Volume | 32 |

Issue number | 4 |

DOIs | |

State | Published - Dec 1999 |

Externally published | Yes |

### Bibliographical note

Funding Information:We wish to thank Andrew Postlewaite and a referee for helpful comments. We are grateful to the participants of the Stony Brook International Conference on Game Theory [1996]. Also, we gratefully acknowledge the support from the Kreitman Foundation and the Monaster Center for Economic Research.

## Keywords

- Cost sharing
- D51
- D61
- D78
- Increasing returns to scale
- Marginal-cost-pricing equilibrium

## ASJC Scopus subject areas

- Economics and Econometrics
- Applied Mathematics