The second-price auction solves King Solomon's dilemma
H. Reiju Mihara
MPRA Paper from University Library of Munich, Germany
Consider the problem of allocating k identical, indivisible objects among n agents, where k is less than n. The planner's objective is to give the objects to the top k valuation agents at zero costs to the planner and the agents. Each agent knows her own valuation of the object and whether it is among the top k. Modify the (k+1)st-price sealed-bid auction by introducing a small participation fee and the option not to participate in it. This strikingly simple mechanism (modified auction) implements the desired outcome in iteratively weakly undominated strategies. Moreover, no pair of agents can profitably deviate from the equilibrium by coordinating their strategies or bribing each other.
Keywords: Solomon's problem; implementation; entry fees; Olszewski's mechanism; collusion; bribes (search for similar items in EconPapers)
JEL-codes: D71 D61 C72 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-exp and nep-gth
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https://mpra.ub.uni-muenchen.de/8801/1/MPRA_paper_8801.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/31962/1/MPRA_paper_31962.pdf revised version (application/pdf)
Journal Article: THE SECOND-PRICE AUCTION SOLVES KING SOLOMON'S DILEMMA (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8801
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