Firms compete for a contract and subcontract part of the work. If subcontracting takes place before the award of the contract, the revenue equivalence result breaks down, as subcontractors anticipate that their bids influence the probability of the firm winning the contract. Properties of the...

In a bargaining setting with asymmetrically informed, inequity-averse parties, a fully efficient mechanism (i.e., the double auction) exists if and only if compassion is strong. Less compassionate parties do not trade in the double auction in the limit of strong envy.