Vickrey Allocation Rule with Income Effect
AbstractWe consider situations where a society tries to efficiently allocate several homogeneous and indivisible goods among agents. Each agent receives at most one unit of the good. For example, suppose that a government wishes to allocate a fixed number of licenses to operate in its country to private companies with highest abilities to utilize the licenses. Usually companies with higher abilities can make more profits by licenses and are willing to pay higher prices for them. Thus, auction mechanisms are often employed to extract the information on companies' abilities and to allocate licenses efficiently. However, if prices are too high, they may damage companies' abilities to operate. Generally high prices may change the benefits agents obtain from the goods unless agents' preferences are quasi-linear, and we call it "income effect". In this paper, we establish that on domains including nonquasi-linear preferences, that is, preferences exhibiting income effect, an allocation rule which satisfies Pareto-efficiency, strategy-proofness, individual rationality, and nonnegative payment uniquely exists and it is the Vickrey allocation rule.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0646.
Date of creation: Dec 2005
Date of revision:
Other versions of this item:
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Milgrom,Paul, 2004.
"Putting Auction Theory to Work,"
Cambridge University Press, number 9780521551847, October.
- Louis Makowski & Joseph M. Ostroy, 1984.
"Vickrey-Clarke-Groves Mechanisms and Perfect Competition,"
UCLA Economics Working Papers
333, UCLA Department of Economics.
- Makowski, Louis & Ostroy, Joseph M., 1987. "Vickrey-Clarke-Groves mechanisms and perfect competition," Journal of Economic Theory, Elsevier, vol. 42(2), pages 244-261, August.
- Lawrence M. Ausubel & Peter Cramton, 2004.
"Vickrey Auctions with Reserve Pricing,"
Papers of Peter Cramton
99wpvic, University of Maryland, Department of Economics - Peter Cramton, revised 28 Jun 1999.
- Demange, Gabrielle & Gale, David & Sotomayor, Marilda, 1986. "Multi-Item Auctions," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 863-72, August.
- 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 427-38, March.
- Edward Clarke, 1971. "Multipart pricing of public goods," Public Choice, Springer, vol. 11(1), pages 17-33, September.
- Roth, Alvin E. & Sotomayor, Marilda, 1992.
Handbook of Game Theory with Economic Applications,
in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 1, chapter 16, pages 485-541
- Klemperer, Paul, 2000.
"What Really Matters in Auction Design,"
CEPR Discussion Papers
2581, C.E.P.R. Discussion Papers.
- Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
- William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
- John W. Hatfield & Paul Milgrom, 2005. "Auctions, Matching and the Law of Aggregate Demand," Levine's Bibliography 122247000000000780, UCLA Department of Economics.
- Mitsunobu Miyake, 1998. "On the incentive properties of multi-item auctions," International Journal of Game Theory, Springer, vol. 27(1), pages 1-19.
- Shinji Ohseto, 2006. "Characterizations of strategy-proof and fair mechanisms for allocating indivisible goods," Economic Theory, Springer, vol. 29(1), pages 111-121, September.
- Toyotaka Sakai, 2012. "Fair waste pricing: an axiomatic analysis to the NIMBY problem," Economic Theory, Springer, vol. 50(2), pages 499-521, June.
- Toyotaka Sakai, 2008. "Second price auctions on general preference domains: two characterizations," Economic Theory, Springer, vol. 37(2), pages 347-356, November.
- Itai Ashlagi & Shigehiro Serizawa, 2012. "Characterizing Vickrey allocation rule by anonymity," Social Choice and Welfare, Springer, vol. 38(3), pages 531-542, March.
- Yuji Fujinaka & Takuma Wakayama, 2008.
"Secure Implementation in Shapley-Scarf Housing Markets,"
ISER Discussion Paper
0727, Institute of Social and Economic Research, Osaka University, revised Feb 2009.
- Yuji Fujinaka & Takuma Wakayama, 2011. "Secure implementation in Shapley–Scarf housing markets," Economic Theory, Springer, vol. 48(1), pages 147-169, September.
- Kazuhiko Hashimoto & Hiroki Saitoh, 2010. "Domain expansion of the pivotal mechanism," Social Choice and Welfare, Springer, vol. 34(3), pages 455-470, March.
- Shigehiro Serizawa, 2006. "Strategy-Proof and Anonymous Allocation Rules of Indivisible Goods: A New Characterization of Vickrey Allocation Rule," ISER Discussion Paper 0648, Institute of Social and Economic Research, Osaka University.
- Svensson, Lars-Gunnar, 2006.
"Coalition Strategy-Proofness and Fairness,"
2006:10, Lund University, Department of Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fumiko Matsumoto).
If references are entirely missing, you can add them using this form.