Shared network investment

This paper discusses the case of inter-firm cost sharing in fixed-capital i nvestment in business-related network. Such cooperation among individual fi rms differs in nature from the collusive conduct in pricing or production i n the sense that decisions on short-term production remain independent. The model in this paper stylized a common network that reduces each member fir m's variable cost of production. Firms benefit from pooling their investmen t in this network thanks to cost subadditivity of the investment. Different dues-assignment rules are found to affect firms' incentive in achieving co llective efficiency.