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Efficient Combinatorial Allocations: Individual Rationality versus Stability

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  • Matsushima Hitoshi

    (Department of Economics, University of Tokyo, Hongo, Bunkyo-ku, Tokyo113-0033, Japan)

Abstract

We investigate combinatorial allocations with opt-out types and clarify the possibility of achieving efficiency under incomplete information. We introduce two distinct collective decision procedures. The first procedure assumes that the central planner designs a mechanism and players have the option to exit. The mechanism requires interim individual rationality. The second procedure assumes that players design a mechanism by committing themselves to participate. The mechanism requires marginal stability against blocking behavior by the largest proper coalitions. We show that the central planner can earn non-negative revenue in the first procedure, if and only if he cannot do so in the second.

Suggested Citation

  • Matsushima Hitoshi, 2019. "Efficient Combinatorial Allocations: Individual Rationality versus Stability," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 19(1), pages 1-11, January.
    • Handle: RePEc:bpj:bejtec:v:19:y:2019:i:1:p:11:n:16
    DOI: 10.1515/bejte-2017-0072
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    References listed on IDEAS

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    1. Green, Jerry & Laffont, Jean-Jacques, 1977. "Characterization of Satisfactory Mechanisms for the Revelation of Preferences for Public Goods," Econometrica, Econometric Society, vol. 45(2), pages 427-438, March.
    2. Louis Makowski & Joseph M. Ostroy, 1989. "Efficient and Individually Rational Bayesian Mechanisms Only Exist on Perfectly Competitive Environments," UCLA Economics Working Papers 566, UCLA Department of Economics.
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    More about this item

    Keywords

    efficient combinatorial allocations; bayesian incentive compatibility; opt-out types; interim individual rationality; marginal stability;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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