The incentive core in co-investment problems

Abstract

We study resource-monotonicity properties of core allocations in coinvestment problems: those where a set of agents pool their endowments of a certain resource or input in order to obtain a joint surplus or output that must be allocated among the agents. We analyze whether agents have incentives to raise their initial contribution (resource-monotonicity). We focus not only on looking for potential incentives to agents who raise their contributions, but also in not harming the payoffs to the rest of agents (strong monotonicity property). A necessary and suficient condition to fulfill this property is stated and proved. We also provide a subclass of coinvestment problems for which any core allocation satisfies the aforementioned strong resource-monotonicity property. Moreover, we introduce the subset of core allocations satisfying this condition, namely the incentive core.