A note on the inefficiency of bidding over the price of a share
AbstractWe 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).
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Bibliographic InfoArticle provided by Elsevier in its journal Mathematical Social Sciences.
Volume (Year): 60 (2010)
Issue (Month): 3 (November)
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Web page: http://www.elsevier.com/locate/inca/505565
Partnership dissolution Double auction Ex-post efficiency;
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