Cost sharing: efficiency and implementation

We study environments where a production process is jointly shared by a fin ite group of agents. The social decision involves the determination of inpu t contribution and output distribution. We define a competitive solution wh en there is decreasing-returns-to-scale which leads to a Pareto optimal out come. Since there is a finite number of agents, the competitive solution is prone to manipulation, mie construct a mechanism for which the set of Nash equilibria coincides with the set of competitive solution outcomes. We def ine a marginal-cost-pricing equilibrium (MCPE) solution for environments wi th increasing returns to scale. These solutions are Pareto optimal under ce rtain conditions. We construct another mechanism that realizes the MCPE. (C ) 1999 Elsevier Science S.A. All rights reserved. JEL classification: D51; D51; D78.