Several partners jointly own an asset that may be traded among them. Each partner has a valuation for the asset; the valuations are known privately and drawn independently from a common probability distribution. We characterize the set of all incentive-compatible and interim- individually- rational trading mechanisms, and give a simple necessary and sufficient condition for such mechanisms to dissolve the partnership ex post efficiently. A bidding game is constructed that achieves such dissolution whenever it is possible. Despite incomplete information about the valuation of the asset, a partnership can be dissolved ex post efficiently provided no single partner owns too large a share; this contrasts with Myerson and Satterthwaite's result that ex post efficiency cannot be achieved when the asset is owned by a single party.
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Paper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number
87econ.
Length: 18 pages Date of creation: 1987 Date of revision:
09 Jun 1998 Publication status: Published in Econometrica, 55:3, May 1987, pages 615-632. Reprinted in Paul Klemperer, ed., The Economic Theory of Auctions, Volume 2, Cheltenham, UK: Edward Elgar, 2000. Handle: RePEc:pcc:pccumd:87econ
Contact details of provider: Postal: Economics Department, University of Maryland, College Park, MD 20742-7211 Phone: (202) 318-0520 Fax: (202) 318-0520 Web page: http://www.cramton.umd.edu
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Find related papers by JEL classification: C70 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - General C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory D44 - Microeconomics - - Market Structure and Pricing - - - Auctions D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
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Cited by: (explanations, 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.)
Roger B. Myerson, 1988.
"Mechanism Design,"
Discussion Papers
796, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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