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

Stergios Athanassoglou, Steven J. Brams, Jay Sethuraman

    Research output: Contribution to journalArticle

    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).

    Original languageEnglish (US)
    Pages (from-to)191-195
    Number of pages5
    JournalMathematical social sciences
    Volume60
    Issue number3
    DOIs
    StatePublished - Nov 1 2010

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    Keywords

    • Double auction
    • Ex-post efficiency
    • Partnership dissolution

    ASJC Scopus subject areas

    • Sociology and Political Science
    • Social Sciences(all)
    • Psychology(all)
    • Statistics, Probability and Uncertainty

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