Cost sharing: Efficiency and implementation

Todd R. Kaplan; David Wettstein

doi:10.1016/S0304-4068(98)00068-8

Cost sharing: Efficiency and implementation

Todd R. Kaplan
, David Wettstein

Research output: Contribution to journal › Article › peer-review

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
Pages (from-to)	489-502
Number of pages	14
Journal	Journal of Mathematical Economics
Volume	32
Issue number	4
DOIs	https://doi.org/10.1016/S0304-4068(98)00068-8
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

Access to Document

10.1016/S0304-4068(98)00068-8

Cite this

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title = "Cost sharing: Efficiency and implementation",

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AU - Wettstein, David

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KW - D51

KW - D61

KW - D78

KW - Increasing returns to scale

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Cost sharing: Efficiency and implementation

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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