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The Second-Price Auction Solves King Solomon'S Dilemma

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  • H. REIJU MIHARA

Abstract

Consider 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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Suggested Citation

  • 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, September.
    • Handle: RePEc:bla:jecrev:v:63:y:2012:i:3:p:420-429
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    File URL: http://hdl.handle.net/10.1111/
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    Cited by:

    1. Gans, Joshua S. & Holden, Richard, 2025. "An ordinal solution to King Solomon’s dilemma," Economics Letters, Elsevier, vol. 252(C).
    2. Makoto Hagiwara & Fumihiro Yonekura, 2020. "Implementation in Iterative Elimination of Obviously Dominated Strategies: An Experiment on King Solomon's Dilemma," Discussion Paper Series DP2020-17, Research Institute for Economics & Business Administration, Kobe University.
    3. Elbittar, Alexander & Di Giannatale, Sonia, 2017. "“Neither I nor you shall have him”: An experimental study of the King Solomon's Dilemma," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 70(C), pages 55-69.
    4. Makoto Hagiwara & Fumihiro Yonekura, 2024. "King Solomon’s dilemma: an experiment on implementation in iterative elimination of (obviously) dominated strategies," Review of Economic Design, Springer;Society for Economic Design, vol. 28(1), pages 1-19, February.
    5. Alexander Elbittar & Sonia B. Di Giannatale, 2010. "King Solomon's Dilemma: An Experimental Study on Implementation," Working Papers DTE 477, CIDE, División de Economía.
    6. Brishti Guha, 2017. "Testing for Malice," Economics Bulletin, AccessEcon, vol. 37(1), pages 327-335.

    More about this item

    JEL classification:

    • 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

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