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

Stergios Athanassoglou; Steven J. Brams; Jay Sethuraman

doi:10.1016/j.mathsocsci.2010.08.003

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

Stergios Athanassoglou, Steven J. Brams, Jay Sethuraman

Research output: Contribution to journal › Article › peer-review

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 language	English (US)
Pages (from-to)	191-195
Number of pages	5
Journal	Mathematical social sciences
Volume	60
Issue number	3
DOIs	https://doi.org/10.1016/j.mathsocsci.2010.08.003
State	Published - Nov 2010

Keywords

Double auction
Ex-post efficiency
Partnership dissolution

ASJC Scopus subject areas

Sociology and Political Science
General Social Sciences
General Psychology
Statistics, Probability and Uncertainty

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10.1016/j.mathsocsci.2010.08.003

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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).",

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N2 - 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).

AB - 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).

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

Abstract

Keywords

ASJC Scopus subject areas

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