A note on the inefficiency of bidding over the price of a share
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 et al. (1987).
Year of publication: |
2010
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Authors: | Athanassoglou, Stergios ; Brams, Steven J. ; Sethuraman, Jay |
Published in: |
Mathematical Social Sciences. - Elsevier, ISSN 0165-4896. - Vol. 60.2010, 3, p. 191-195
|
Publisher: |
Elsevier |
Keywords: | Partnership dissolution Double auction Ex-post efficiency |
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