Surplus Sharing with a Two-State Mechanism.

In this article we consider environments where agents jointly produce a private output good by contributing privately owned resources. An efficient Outcome may not be realized due to strategic behavior and conflicting interests of the agents. We construct a two-stage mechanism, building on a Varian mechanism. The modified mechanism ensures an equilibrium for a large class of preferences and guarantees the feasibility of outcomes. Copyright 2000 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.