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Three Solutions to a Simple Commons Problem

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  • Moulin, Herve

    (Rice U)

Abstract

We compare the equity and incentive properties of three efficient solutions to a simple problem of cooperative production with binary demands for a homogeneous service, when marginal cost is either monotonically increasing or monotonically decreasing. The solutions are the familiar competitive equilibrium with equal incomes. The Shapley value of the stand alone cooperative game, and the virtual price solution, applying the egalitarian equivalence idea to this particular model.

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  • Moulin, Herve, 2001. "Three Solutions to a Simple Commons Problem," Working Papers 2001-05, Rice University, Department of Economics.
    • Handle: RePEc:ecl:riceco:2001-05
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    File URL: http://www.ruf.rice.edu/~econ/papers/2001papers/05Moulin.pdf
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    References listed on IDEAS

    as
    1. HervÈ CrËs & HervÈ Moulin, 2003. "Commons with increasing marginal costs: random priority versus average cost," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(3), pages 1097-1115, August.
    2. Moulin, Herve & Shenker, Scott, 1992. "Serial Cost Sharing," Econometrica, Econometric Society, vol. 60(5), pages 1009-1037, September.
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