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The Linking of Collective Decisions and Efficiency

  • Matthew O. Jackson

    (California Institute of Technology)

  • Hugo F. Sonnenschein

    (University of Chicago)

For groups that must make several decisions of similar form, we define a simple and general mechanism that is designed to promote social efficiency. The mechanism links the various decisions by forcing agents to budget their representations of preferences so that the frequency of preferences across problems conforms to the underlying distribution of preferences. We show that as the mechanism operates over a growing number decisions, the welfare costs of incentive constraints completely disappear. In addition, as the number of decisions being linked grows, a truthful strategy is increasingly successful and secures the efficient utility level for an agent.

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File URL: http://econwpa.repec.org/eps/mic/papers/0303/0303007.pdf
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Paper provided by EconWPA in its series Microeconomics with number 0303007.

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Date of creation: 28 Mar 2003
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Handle: RePEc:wpa:wuwpmi:0303007
Note: Type of Document - ; figures: included
Contact details of provider: Web page: http://econwpa.repec.org

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  1. D. B. Bernheim, 2010. "Rationalizable Strategic Behavior," Levine's Working Paper Archive 514, David K. Levine.
  2. Chakraborty, Archishman & Harbaugh, Rick, 2003. "Cheap talk comparisons in multi-issue bargaining," Economics Letters, Elsevier, vol. 78(3), pages 357-363, March.
  3. Casella, Alessandra, 2002. "Storable Votes," CEPR Discussion Papers 3508, C.E.P.R. Discussion Papers.
  4. McAfee, R Preston & McMillan, John & Whinston, Michael D, 1989. "Multiproduct Monopoly, Commodity Bundling, and Correlation of Values," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 371-83, May.
  5. Archishman Chakraborty & Rick Harbaugh, 2003. "Ordinal Cheap Talk," Claremont Colleges Working Papers 2003-05, Claremont Colleges.
  6. Cremer, Jacques & McLean, Richard P, 1988. "Full Extraction of the Surplus in Bayesian and Dominant Strategy Auctions," Econometrica, Econometric Society, vol. 56(6), pages 1247-57, November.
  7. Adams, William James & Yellen, Janet L, 1976. "Commodity Bundling and the Burden of Monopoly," The Quarterly Journal of Economics, MIT Press, vol. 90(3), pages 475-98, August.
  8. Armstrong, Mark, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 151-68, January.
  9. Pearce, David G, 1984. "Rationalizable Strategic Behavior and the Problem of Perfection," Econometrica, Econometric Society, vol. 52(4), pages 1029-50, July.
  10. Archishman Chakraborty & Nandini Gupta, 2004. "Ordinal Cheap Talk in Common Value Auctions," Econometric Society 2004 North American Winter Meetings 605, Econometric Society.
  11. Preston McAfee, R., 1992. "Amicable divorce: Dissolving a partnership with simple mechanisms," Journal of Economic Theory, Elsevier, vol. 56(2), pages 266-293, April.
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