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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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    References listed on IDEAS

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    1. 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.
    2. Perry, Motty & Reny, Philip J., 1999. "A General Solution to King Solomon's Dilemma," Games and Economic Behavior, Elsevier, vol. 26(2), pages 279-285, January.
    3. 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.
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    Cited by:

    1. repec:eee:soceco:v:70:y:2017:i:c:p:55-69 is not listed on IDEAS
    2. Brishti Guha, 2017. "Testing for Malice," Economics Bulletin, AccessEcon, vol. 37(1), pages 327-335.
    3. Alexander Elbittar & Sonia B. Di Giannatale, 2010. "King Solomon’s Dilemma: An Experimental Study on Implementation," Working papers DTE 477, CIDE, División de Economía.

    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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