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

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...

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Veröffentlicht in:Mathematical social sciences 2010-11, Vol.60 (3), p.191-195
Hauptverfasser: Athanassoglou, Stergios, Brams, Steven J., Sethuraman, Jay
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container_title Mathematical social sciences
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creator Athanassoglou, Stergios
Brams, Steven J.
Sethuraman, Jay
description 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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source RePEc; Elsevier ScienceDirect Journals
subjects Auctions
Bidding
Business partnership
Double auction
Ex-post efficiency
Partnership dissolution
Partnership dissolution Double auction Ex-post efficiency
Stock prices
Unequal endowments
Valuation
title A note on the inefficiency of bidding over the price of a share
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