A note on the inefficiency of bargaining over the price of a share

Athanassoglou, Stergios and Brams, Steven J. and Sethuraman, Jay (2010): A note on the inefficiency of bargaining over the price of a share. Published in: Mathematical Social Sciences No. 60 (2010): pp. 191-195.

Abstract

We study the problem of dissolving a partnership when agents have unequal endowments. Agents bid on the price of the entire partnership. The highest bidder is awarded the partnership and buys out her partners' shares at a per-unit price that is a function of the two highest bids. We show that there exists no price-setting mechanism satisfying certain mild regularity properties that is ex-post efficient, for any common prior of valuations. This result sharply contrasts the equal-endowment case in which efficient dissolution of the sort we are examining is possible through a simple k-double auction, as suggested by Cramton, Gibbons, and Klemperer (Econometrica, 1987).

• Item Type: MPRA Paper
• Language: English
• Keywords: Partnership Dissolution; Double Auction; Ex-Post Efficiency
• Subjects: C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C78 - Bargaining Theory ; Matching Theory; C - Mathematical and Quantitative Methods > C7 - Game Theory and Bargaining Theory > C72 - Noncooperative Games

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