Borgers, T. and Postl, P., 2009. Efficient compromising. Journal of Economic Theory, 144 (5), pp. 2057-2076.
Two agents must select one of three alternatives. Their ordinal rankings are commonly known and diametrically opposed. Efficiency requires choosing the alternative the agents rank second whenever the weighted sum of their von Neumann Morgenstern utilities is higher than under either agent’s favorite alternative. The agents’ utilities of the middle-ranked alternative are i.i.d., privately observed random variables. In our setup, which is closely related to a public goods problem where agents face liquidity constraints but no participation constraints, decision rules that truthfully elicit utilities and implement efficient decisions do not exist. We provide analytical and numerical results on second-best rules.
|Item Type ||Articles|
|Creators||Borgers, T.and Postl, P.|
|Uncontrolled Keywords||arbitration, compromise, mechanism design without transferable utility|
|Departments||Faculty of Humanities & Social Sciences > Economics|
|Publisher Statement||Postl_J_Economic_Theory_2009_144_5.pdf: NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Theory. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Theory, vol 144, issue 5, 2009, DOI 10.1016/j.jet.2009.01.011|
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