Cooperative Production and Efficiency

Abstract

We characterize the sharing rule for which a contribution mechanism achieves efficiency in a cooperative production setting when agents are heterogeneous. The sharing rule bears no resemblance to those considered by the previous literature. We also show for a large class of sharing rules that if Nash equilibrium yields efficient allocations, the production function displays constant returns to scale, a case in which cooperation in production is useless.
Published as: Inspired and inspiring: Hervé Moulin and the discovery of the beauty contest game in Mathematical Social Sciences , Vol. 90, 191-207, November, 2017