Cooperative Production and Efficiency


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: Cooperative Production and Efficiency in Mathematical Social Sciences , Vol. 57, No. 2, 143--154, January, 2009