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The Incompatibility of Pareto Optimality and Dominant-Strategy Incentive Compatibility in Sufficiently-Anonymous Budget-Constrained Quasilinear Settings

  • Rica Gonen

    ()

    (Department of Management and Economics, The Open University of Israel, 1 University Road, Raanana 43537, Israel)

  • Anat Lerner

    ()

    (Department of Mathematics and Computer Science, The Open University of Israel, 1 University Road, Raanana 43537, Israel)

We analyze the space of deterministic, dominant-strategy incentive compatible, individually rational and Pareto optimal combinatorial auctions. We examine a model with multidimensional types, nonidentical items, private values and quasilinear preferences for the players with one relaxation; the players are subject to publicly-known budget constraints. We show that the space includes dictatorial mechanisms and that if dictatorial mechanisms are ruled out by a natural anonymity property, then an impossibility of design is revealed. The same impossibility naturally extends to other abstract mechanisms with an arbitrary outcome set if one maintains the original assumptions of players with quasilinear utilities, public budgets and nonnegative prices.

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Article provided by MDPI, Open Access Journal in its journal Games.

Volume (Year): 4 (2013)
Issue (Month): 4 (November)
Pages: 690-710

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Handle: RePEc:gam:jgames:v:4:y:2013:i:4:p:690-710:d:30533
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  1. Babaioff, Moshe & Feldman, Michal & Nisan, Noam & Winter, Eyal, 2012. "Combinatorial agency," Journal of Economic Theory, Elsevier, vol. 147(3), pages 999-1034.
  2. Jean-Pierre Benoit & Vijay Krishna, 1998. "Multiple-Object Auctions with Budget Constrained Bidders," Game Theory and Information 9805001, EconWPA, revised 26 Jul 1999.
  3. Maskin, Eric S., 2000. "Auctions, development, and privatization: Efficient auctions with liquidity-constrained buyers," European Economic Review, Elsevier, vol. 44(4-6), pages 667-681, May.
  4. Ashlagi Itai & Braverman Mark & Hassidim Avinatan & Lavi Ron & Tennenholtz Moshe, 2010. "Position Auctions with Budgets: Existence and Uniqueness," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 10(1), pages 1-32, May.
  5. Lavi, Ron & May, Marina, 2012. "A note on the incompatibility of strategy-proofness and Pareto-optimality in quasi-linear settings with public budgets," Economics Letters, Elsevier, vol. 115(1), pages 100-103.
  6. Dobzinski, Shahar & Lavi, Ron & Nisan, Noam, 2012. "Multi-unit auctions with budget limits," Games and Economic Behavior, Elsevier, vol. 74(2), pages 486-503.
  7. Lerner Anat & Gonen Rica, 2013. "Dictatorial Mechanisms in Constrained Combinatorial Auctions," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 13(1), pages 18, June.
  8. William Vickrey, 1961. "Counterspeculation, Auctions, And Competitive Sealed Tenders," Journal of Finance, American Finance Association, vol. 16(1), pages 8-37, 03.
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