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

Stergios Athanassoglou, Steven Brams () and Jay Sethuraman
Authors registered in the RePEc Author Service: Stergios Athanasoglou

Mathematical Social Sciences, 2010, vol. 60, issue 3, 191-195

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).

Keywords: Partnership; dissolution; Double; auction; Ex-post; efficiency (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:matsoc:v:60:y:2010:i:3:p:191-195

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