Profit sharing in unique Nash equilibrium: Characterization in the two-agent case |
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Authors: | Justin Leroux |
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Institution: | aInstitut d'Économie Appliquée, HEC Montréal, CIREQ and CIRPÉE 3000, Chemin de la Côte Sainte-Catherine, Montréal, QC H3T 2A7, Canada |
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Abstract: | 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 characterization of their serial mechanism as the unique cost-sharing rule satisfying the same incentives property Moulin, H., Shenker, S., 1992. Serial cost sharing. Econometrica 60 (5), 1009–1037]. We also show that the familiar stand-alone test characterizes the class of fixed-path methods under our incentives criterion Friedman, E.J., 2004. Strong monotonicity in surplus sharing. Econ. Theory 23, 643–658]. |
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Keywords: | Joint production Serial rule Decreasing serial rule Strategyproofness |
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