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Optimal Private Good Allocation: The Case for a Balanced Budget

Listed author(s):
  • Moritz Drexl
  • Andreas Kleiner

    ()

In an independent private value auction environment, we are interested in strategy-proof mechanisms that maximize the agents' residual surplus, that is, the utility derived from the physical allocation minus transfers accruing to an external entity. We find that, under the assumption of an increasing hazard rate of type distributions, an optimal deterministic mechanism never extracts any net payments from the agents, \ie it will be budget-balanced. Specifically, optimal mechanisms have a simple ``posted price'' or ``option'' form. In the bilateral trade environment, we obtain optimality of posted price mechanisms without any assumption on type distributions, thereby providing a rationale for confining attention to budget-balanced mechanisms.

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File URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse03_2012.pdf
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Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse03_2012.

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Length: Creation date: 2012-09
Date of creation:
Handle: RePEc:bon:bonedp:bgse03_2012
Contact details of provider: Postal:
Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany

Fax: +49 228 73 6884
Web page: http://www.bgse.uni-bonn.de

References listed on IDEAS
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  6. Alexey Kushnir, 2013. "On the equivalence between Bayesian and dominant strategy implementation: the case of correlated types," ECON - Working Papers 129, Department of Economics - University of Zurich.
  7. Moulin, Hervé, 2009. "Almost budget-balanced VCG mechanisms to assign multiple objects," Journal of Economic Theory, Elsevier, vol. 144(1), pages 96-119, January.
  8. d'Aspremont, Claude & Gerard-Varet, Louis-Andre, 1979. "Incentives and incomplete information," Journal of Public Economics, Elsevier, vol. 11(1), pages 25-45, February.
  9. Guo, Mingyu & Conitzer, Vincent, 2009. "Worst-case optimal redistribution of VCG payments in multi-unit auctions," Games and Economic Behavior, Elsevier, vol. 67(1), pages 69-98, September.
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  11. Alejandro M. Manelli & Daniel R. Vincent, 2010. "Bayesian and Dominant‐Strategy Implementation in the Independent Private‐Values Model," Econometrica, Econometric Society, vol. 78(6), pages 1905-1938, November.
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  16. de Clippel, Geoffroy & Naroditskiy, Victor & Polukarov, Maria & Greenwald, Amy & Jennings, Nicholas R., 2014. "Destroy to save," Games and Economic Behavior, Elsevier, vol. 86(C), pages 392-404.
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  17. Eso, Peter & Futo, Gabor, 1999. "Auction design with a risk averse seller," Economics Letters, Elsevier, vol. 65(1), pages 71-74, October.
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  19. Tymon Tatur, 2005. "On the Trade off Between Deficit and Inefficiency and the Double Auction with a Fixed Transaction Fee," Econometrica, Econometric Society, vol. 73(2), pages 517-570, March.
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