A note on the inefficiency of bidding over the price of a share
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).
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.:
- Kittsteiner, Thomas, 2003.
"Partnerships and double auctions with interdependent valuations,"
Games and Economic Behavior,
Elsevier, vol. 44(1), pages 54-76, July.
- Kittsteiner, Thomas, 2000. "Partnerships and Double Auctions with Interdependent Valuations," Sonderforschungsbereich 504 Publications 01-15, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- Jeremy Bulow & Ming Huang & Paul Klemperer, 1999.
"Toeholds and Takeovers,"
Journal of Political Economy,
University of Chicago Press, vol. 107(3), pages 427-454, June.
- Bulow, Jeremy I. & Huang, Ming & Klemperer, Paul, 1996. "Toeholds and Takeovers," CEPR Discussion Papers 1486, C.E.P.R. Discussion Papers.
- Jeremy Bulow & Ming Huang & Paul Klemperer, 1996. "Toeholds and Takeovers," Finance 9608001, EconWPA.
- Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Finance 9903005, EconWPA.
- Paul Klemperer & Jeremy Bulow, 1998. "Toeholds and Takeovers," Economics Series Working Papers 1998-W04, University of Oxford, Department of Economics.
- Engelbrecht-Wiggans Richard, 1994. "Auctions with Price-Proportional Benefits to Bidders," Games and Economic Behavior, Elsevier, vol. 6(3), pages 339-346, May.
- Cramton, Peter & Gibbons, Robert & Klemperer, Paul, 1987.
"Dissolving a Partnership Efficiently,"
Econometric Society, vol. 55(3), pages 615-32, May.
- Peter Cramton & Robert Gibbons & Paul Klemperer, 1985. "Dissolving a Partnership Efficiently," Working papers 406, Massachusetts Institute of Technology (MIT), Department of Economics.
- Peter Cramton & Robert Gibbons & Paul Klemperer, 1987. "Dissolving a Partnership Efficiently," Papers of Peter Cramton 87econ, University of Maryland, Department of Economics - Peter Cramton, revised 09 Jun 1998.
- Groves, Theodore, 1973. "Incentives in Teams," Econometrica, Econometric Society, vol. 41(4), pages 617-31, July.
- John Morgan, 2004. "Dissolving a partnership (un)fairly," Economic Theory, Springer, vol. 23(4), pages 909-923, May.
- Richard R. W. Brooks & Claudia M. Landeo & Kathryn E. Spier, 2010.
"Trigger happy or gun shy? Dissolving common-value partnerships with Texas shootouts,"
RAND Journal of Economics,
RAND Corporation, vol. 41(4), pages 649-673.
- Brooks, Richard & Landeo, Claudia & Spier, Kathryn, 2009. "Trigger Happy or Gun Shy? Dissolving Common-Value Partnerships with Texas Shootouts," Working Papers 2009-1, University of Alberta, Department of Economics, revised 01 Jul 2013.
- Fieseler, Karsten & Kittsteiner, Thomas & Moldovanu, Benny, 1999.
"Partnerships, Lemons and Efficient Trade,"
Sonderforschungsbereich 504 Publications
99-71, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
- de Frutos, M. Angeles, 2000. "Asymmetric Price-Benefits Auctions," Games and Economic Behavior, Elsevier, vol. 33(1), pages 48-71, October.
- Myerson, Roger B. & Satterthwaite, Mark A., 1983.
"Efficient mechanisms for bilateral trading,"
Journal of Economic Theory,
Elsevier, vol. 29(2), pages 265-281, April.
- Preston McAfee, R., 1992. "Amicable divorce: Dissolving a partnership with simple mechanisms," Journal of Economic Theory, Elsevier, vol. 56(2), pages 266-293, April.
When requesting a correction, please mention this item's handle: RePEc:eee:matsoc:v:60:y:2010:i:3:p:191-195. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.