Mihara, H. Reiju (2008): The second-price auction solves King Solomon's dilemma.
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Consider the problem of allocating k identical, indivisible objects among n agents, where k is less than n. The planner's objective is to give the objects to the top k valuation agents at zero costs to the planner and the agents. Each agent knows her own valuation of the object and whether it is among the top k. Modify the (k+1)st-price sealed-bid auction by introducing a small participation fee and the option not to participate in it. This strikingly simple mechanism (modified auction) implements the desired outcome in iteratively weakly undominated strategies. Moreover, no pair of agents can profitably deviate from the equilibrium by coordinating their strategies or bribing each other.
|Item Type:||MPRA Paper|
|Original Title:||The second-price auction solves King Solomon's dilemma|
|Keywords:||Solomon's problem; implementation; entry fees; Olszewski's mechanism; collusion; bribes|
|Subjects:||D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice; Clubs; Committees; Associations
D - Microeconomics > D6 - Welfare Economics > D61 - Allocative Efficiency; Cost-Benefit Analysis
C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games
|Depositing User:||H. Reiju Mihara|
|Date Deposited:||21. May 2008 07:31|
|Last Modified:||21. Feb 2013 14:48|
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