Cooperative Production and Efficiency
22 Pages Posted: 15 Nov 2015
Date Written: July 1, 2008
We characterize the sharing rule that achieves efficiency in a contribution mechanism when agents are heterogeneous. This rule is not the one that was found by Sen when agents are identical. We also show that for a large class of sharing rules if Nash equilibrium yields efficient allocations, there must be constant returns to scale in production, a case in which cooperation is useless.
Keywords: Sharing Rule, Cooperative production, Nash equilibrium
JEL Classification: C72, D71
Suggested Citation: Suggested Citation