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Efficient Compromising

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  • Tilman Börgers
  • Peter Postl

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

Paper provided by UCLA Department of Economics in its series Levine's Bibliography with number 122247000000000801.

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Date of creation: 04 Jan 2005
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Handle: RePEc:cla:levrem:122247000000000801

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Cited by:
  1. Borgers, Tilman & Smith, Doug, 2011. "Robust mechanism design and dominant strategy voting rules," MPRA Paper 37027, University Library of Munich, Germany.
  2. Postl, Peter, 2013. "A ‘divide and choose’ approach to compromising," Economics Letters, Elsevier, vol. 119(2), pages 204-209.
  3. Rafael Hortala-Vallve, 2010. "Inefficiencies on linking decisions," Social Choice and Welfare, Springer, vol. 34(3), pages 471-486, March.
  4. Hanming Fang & Peter Norman, 2005. "Overcoming Participation Constraints," Cowles Foundation Discussion Papers 1511, Cowles Foundation for Research in Economics, Yale University.
  5. 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.
  6. Schmitz, Patrick W. & Tröger, Thomas, 2011. "The (sub-)optimality of the majority rule," MPRA Paper 32716, University Library of Munich, Germany.
  7. Giles, Adam & Postl, Peter, 2014. "Equilibrium and effectiveness of two-parameter scoring rules," Mathematical Social Sciences, Elsevier, vol. 68(C), pages 31-52.
  8. Alex Gershkov & Benny Moldovanu & Xianwen Shi, 2013. "Optimal Mechanism Design without Money," Working Papers tecipa-481, University of Toronto, Department of Economics.

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