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Efficient compromising

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  • Börgers, Tilman
  • Postl, Peter

Abstract

Two agents must select one of three alternatives. Their ordinal rankings are commonly known and diametrically opposed. Efficiency requires choosing the alternative the agents rank second whenever the weighted sum of their von Neumann Morgenstern utilities is higher than under either agent's favorite alternative. The agents' utilities of the middle-ranked alternative are i.i.d., privately observed random variables. In our setup, which is closely related to a public goods problem where agents face liquidity constraints but no participation constraints, decision rules that truthfully elicit utilities and implement efficient decisions do not exist. We provide analytical and numerical results on second-best rules.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Theory.

Volume (Year): 144 (2009)
Issue (Month): 5 (September)
Pages: 2057-2076

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Handle: RePEc:eee:jetheo:v:144:y:2009:i:5:p:2057-2076

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Web page: http://www.elsevier.com/locate/inca/622869

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Keywords: Arbitration Compromise Mechanism design without transferable utility;

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References

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  9. Rob, Rafael, 1989. "Pollution claim settlements under private information," Journal of Economic Theory, Elsevier, vol. 47(2), pages 307-333, April.
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  12. Cremer, Jacques & McLean, Richard P, 1985. "Optimal Selling Strategies under Uncertainty for a Discriminating Monopolist When Demands Are Interdependent," Econometrica, Econometric Society, vol. 53(2), pages 345-61, March.
  13. d'ASPREMONT, Claude & GERARD-VARET, Louis-André, . "Incentives and incomplete information," CORE Discussion Papers RP -354, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Rafael Hortala-Vallve, 2007. "Qualitative Voting," Economics Series Working Papers 320, University of Oxford, Department of Economics.
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Citations

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Cited by:
  1. Rafael Hortala-Vallve, 2010. "Inefficiencies on linking decisions," Social Choice and Welfare, Springer, vol. 34(3), pages 471-486, March.
  2. Postl, Peter, 2013. "A ‘divide and choose’ approach to compromising," Economics Letters, Elsevier, vol. 119(2), pages 204-209.
  3. Schmitz, Patrick W. & Tröger, Thomas, 2011. "The (sub-)optimality of the majority rule," MPRA Paper 32716, University Library of Munich, Germany.
  4. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Mechanism Design without Money," Working Papers tecipa-481, University of Toronto, Department of Economics.
  5. Börgers, Tilman & Smith, Doug, 2014. "Robust mechanism design and dominant strategy voting rules," Theoretical Economics, Econometric Society, vol. 9(2), May.
  6. Jose Apesteguia & Miguel A. Ballester & Rosa Ferrer, 2006. "On the justice of voting systems," Economics Working Papers 987, Department of Economics and Business, Universitat Pompeu Fabra.
  7. Hanming Fang & Peter Norman, 2005. "Overcoming Participation Constraints," Cowles Foundation Discussion Papers 1511, Cowles Foundation for Research in Economics, Yale University.
  8. Giles, Adam & Postl, Peter, 2014. "Equilibrium and effectiveness of two-parameter scoring rules," Mathematical Social Sciences, Elsevier, vol. 68(C), pages 31-52.

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