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

Stergios Athanassoglou, Steven 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 2010

    Fingerprint

    Bidding
    Financial Management
    Double Auction
    Dissolution
    Regularity Properties
    auction
    regularity
    Unequal
    Valuation
    Sort
    Entire
    Unit
    Partnership
    Inefficiency
    Endowments
    Bid

    Keywords

    • Double auction
    • Ex-post efficiency
    • Partnership dissolution

    ASJC Scopus subject areas

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

    Cite this

    A note on the inefficiency of bidding over the price of a share. / Athanassoglou, Stergios; Brams, Steven; Sethuraman, Jay.

    In: Mathematical Social Sciences, Vol. 60, No. 3, 11.2010, p. 191-195.

    Research output: Contribution to journalArticle

    Athanassoglou, Stergios ; Brams, Steven ; Sethuraman, Jay. / A note on the inefficiency of bidding over the price of a share. In: Mathematical Social Sciences. 2010 ; Vol. 60, No. 3. pp. 191-195.
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