Farsighted stability in average return games

We consider a production economy with a commonly owned production process. In an average return game for such an economy, each agent chooses her input contribution and total output is distributed proportional to individual input contributions. We examine two notions of stability on strategy profiles in an average return game: a farsighted stable set and the largest consistent set. We show that every farsighted stable set is essentially a singleton and it is contained in the set of Pareto efficient strategy profiles. By contrast, the largest consistent set is so large as to contain also Pareto inefficient strategy profiles, i.e., it is equal to the set of individually rational strategy profiles. [Copyright &y& Elsevier]