Serial Cost Sharing

Abstract

The authors consider the problem of cost sharing in the case of a fixed group of agents sharing a one input, one output technology with decreasing returns. They introduce and analyze the serial cost sharing method. Among agents endowed with convex and monotonic preferences, serial cost sharing is dominance solvable and its unique Nash equilibrium is also robust to coalitional deviations. The authors show that no other smooth cost sharing mechanism yields a unique Nash equilibrium at all preference profiles. Copyright 1992 by The Econometric Society.

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