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The Linking of Collective Decisions and Efficiency

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Author Info
Matthew O. Jackson (California Institute of Technology)
Hugo F. Sonnenschein (University of Chicago)

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Abstract

For groups that must make several decisions of similar form, we define a simple and general mechanism that is designed to promote social efficiency. The mechanism links the various decisions by forcing agents to budget their representations of preferences so that the frequency of preferences across problems conforms to the underlying distribution of preferences. We show that as the mechanism operates over a growing number decisions, the welfare costs of incentive constraints completely disappear. In addition, as the number of decisions being linked grows, a truthful strategy is increasingly successful and secures the efficient utility level for an agent.

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Paper provided by EconWPA in its series Microeconomics with number 0303007.

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Date of creation: 28 Mar 2003
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Handle: RePEc:wpa:wuwpmi:0303007

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Web page: http://129.3.20.41

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Related research
Keywords: linking decisions; mechanism design; incentives; incentive compatibility; bundling;

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Find related papers by JEL classification:
C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation

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References listed on IDEAS
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.:
  1. Armstrong, Mark, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Blackwell Publishing, vol. 66(1), pages 151-68, January. [Downloadable!] (restricted)
    Other versions:
  2. Archishman Chakraborty & Nandini Gupta, 2004. "Ordinal Cheap Talk in Common Value Auctions," Econometric Society 2004 North American Winter Meetings 605, Econometric Society. [Downloadable!]
  3. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August. [Downloadable!] (restricted)
  4. Archishman Chakraborty & Nandini Gupta & Rick Harbaugh, 2002. "Seller Cheap Talk in Common Value Auctions," Claremont Colleges Working Papers 2002-30, Claremont Colleges. [Downloadable!]
  5. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July. [Downloadable!] (restricted)
  6. Ledyard, John & Palfrey, Thomas, 2003. "A general characterization of interim efficient mechanisms for independent linear environments," Working Papers 1186, California Institute of Technology, Division of the Humanities and Social Sciences. [Downloadable!]
  7. Preston McAfee, R., 1992. "Amicable divorce: Dissolving a partnership with simple mechanisms," Journal of Economic Theory, Elsevier, vol. 56(2), pages 266-293, April. [Downloadable!] (restricted)
  8. Chakraborty, Archishman & Harbaugh, Rick, 2003. "Cheap talk comparisons in multi-issue bargaining," Economics Letters, Elsevier, vol. 78(3), pages 357-363, March. [Downloadable!] (restricted)
  9. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November. [Downloadable!] (restricted)
  10. Bernheim, B Douglas, 1984. "Rationalizable Strategic Behavior," Econometrica, Econometric Society, vol. 52(4), pages 1007-28, July. [Downloadable!] (restricted)
  11. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May. [Downloadable!] (restricted)
  12. Casella, Alessandra, 2002. "Storable Votes," CEPR Discussion Papers 3508, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  13. Archishman Chakraborty & Rick Harbaugh, 2003. "Ordinal Cheap Talk," Claremont Colleges Working Papers 2003-05, Claremont Colleges. [Downloadable!]
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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.)

  1. Ken Hendricks & Robert Porter & Guofu Tan, 2003. "Bidding Rings and the Winner's Curse: The Case of Federal Offshore Oil and Gas Lease Auctions," NBER Working Papers 9836, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Archishman Chakraborty & Rick Harbaugh, 2003. "Ordinal Cheap Talk," Claremont Colleges Working Papers 2003-05, Claremont Colleges. [Downloadable!]
  3. Debraj Ray & Kfir Eliaz & Ronny Razin, 2004. "Group Decision-Making in the Shadow of Disagreement," Working Papers 2004.83, Fondazione Eni Enrico Mattei. [Downloadable!]
    Other versions:
  4. Peter Norman, 2004. "An Efficiency Rational for Bundling of Public Goods," Theory workshop papers 658612000000000084, UCLA Department of Economics. [Downloadable!]
    Other versions:
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