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Divide and compromise

Rodrigo Velez () and Antonio Nicolo' ()

No 20160710-001, Working Papers from Texas A&M University, Department of Economics

Abstract: We introduce a symmetrized version of the popular divide and choose mechanism for the allocation of a collectively owned indivisible good among two agents when monetary compensation is available. Our proposal retains the simplicity of divide and choose and corrects its ex-post asymmetry. When there is complete information, i.e., agents know each other well, it implements in subgame perfect equilibria a unique allocation that would be obtained by a balanced market. By correcting the ex-post asymmetry of divide and choose, our proposal may reduce welfare losses documented by laboratory studies for both divide and choose and auction-type mechanisms.

Keywords: indivisible goods; no-envy; implementation in subgame perfect equilibria (search for similar items in EconPapers)
JEL-codes: D63 C72 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2016-07-10
New Economics Papers: this item is included in nep-gth and nep-mic
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Journal Article: Divide and compromise (2017) Downloads
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