We study the problem of dissolving an equal-entitlement partnership when the objective is to minimize maximum regret. We initially focus on the family of linear-pricing mechanisms and derive regret-optimizing strategies. We also demonstrate that there exist linear-pricing mechanisms satisfying ex-post efficiency. Next, we analyze a binary-search mechanism which is ex-post individually rational. We discuss connections with the standard Bayesian-Nash framework for both linear and binary-search mechanisms. On a more general level, we show that if entitlements are unequal, ex-post efficiency and ex-post individual rationality impose significant restrictions on permissible mechanisms. In particular, they rule out both linear and binary-search mechanisms.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
12776.
Find related papers by JEL classification: D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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