The second-price auction solves King Solomon's dilemma
AbstractConsider the problem of allocating k identical, indivisible objects among n agents, where k is less than n. The planner's objective is to give the objects to the top k valuation agents at zero costs to the planner and the agents. Each agent knows her own valuation of the object and whether it is among the top k. Modify the (k+1)st-price sealed-bid auction by introducing a small participation fee and the option not to participate in it. This strikingly simple mechanism (modified auction) implements the desired outcome in iteratively weakly undominated strategies. Moreover, no pair of agents can profitably deviate from the equilibrium by coordinating their strategies or bribing each other.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 8801.
Date of creation: May 2008
Date of revision:
Solomon's problem; implementation; entry fees; Olszewski's mechanism; collusion; bribes;
Other versions of this item:
- H. Reiju Mihara, 2012. "The Second-Price Auction Solves King Solomon'S Dilemma," The Japanese Economic Review, Japanese Economic Association, vol. 63(3), pages 420-429, 09.
- D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
- D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-31 (All new papers)
- NEP-CTA-2008-05-31 (Contract Theory & Applications)
- NEP-EXP-2008-05-31 (Experimental Economics)
- NEP-GTH-2008-05-31 (Game Theory)
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.:
- Parimal Kanti Bag; Hamid Sabourian, 2004.
"Distributing Awards Efficiently: More on King Solomon's Problem,"
Econometric Society 2004 North American Summer Meetings
257, Econometric Society.
- Bag, Parimal Kanti & Sabourian, Hamid, 2005. "Distributing awards efficiently: More on King Solomon's problem," Games and Economic Behavior, Elsevier, vol. 53(1), pages 43-58, October.
- Bag, P.K. & Sabourian, H., 2004. "Distributing Awards Efficiently: More on King Solomon’s Problem," Cambridge Working Papers in Economics 0418, Faculty of Economics, University of Cambridge.
- Perry, M. & Reny, P.J., 1995.
"A general solution to king Solomon's dilemma,"
1995-81, Tilburg University, Center for Economic Research.
- Olszewski, Wojciech, 2003. "A simple and general solution to King Solomon's problem," Games and Economic Behavior, Elsevier, vol. 42(2), pages 315-318, February.
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