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A note on the inefficiency of bidding over the price of a share

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  • Athanassoglou, Stergios
  • Brams, Steven J.
  • Sethuraman, Jay

Abstract

We study the problem of dissolving a partnership when agents have unequal endowments. Agents bid on the price of the entire partnership. The highest bidder is awarded the partnership and buys out her partners' shares at a per-unit price that is a function of the two highest bids. We show that there exists no price-setting mechanism satisfying certain mild regularity properties that is ex-post efficient, for any common prior of valuations. This result sharply contrasts the equal-endowment case in which efficient dissolution of the sort we are examining is possible through a simple k-double auction, as suggested by Cramton et al. (1987).

Suggested Citation

  • Athanassoglou, Stergios & Brams, Steven J. & Sethuraman, Jay, 2010. "A note on the inefficiency of bidding over the price of a share," Mathematical Social Sciences, Elsevier, vol. 60(3), pages 191-195, November.
    • Handle: RePEc:eee:matsoc:v:60:y:2010:i:3:p:191-195
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    References listed on IDEAS

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    1. de Frutos, M. Angeles, 2000. "Asymmetric Price-Benefits Auctions," Games and Economic Behavior, Elsevier, vol. 33(1), pages 48-71, October.
    2. Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 2003. "Partnerships, lemons, and efficient trade," Journal of Economic Theory, Elsevier, vol. 113(2), pages 223-234, December.
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    10. Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-631, July.
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    Cited by:

    1. Wasser, Cédric, 2013. "Bilateral k+1-price auctions with asymmetric shares and values," Games and Economic Behavior, Elsevier, vol. 82(C), pages 350-368.

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