Optimal Private Good Allocation: The Case for a Balanced Budget

Moritz Drexl and Andreas Kleiner ()

No 03/2012, Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE)

Abstract: In an independent private value auction environment, we are interested in strategy-proof mechanisms that maximize the agents' residual surplus, that is, the utility derived from the physical allocation minus transfers accruing to an external entity. We find that, under the assumption of an increasing hazard rate of type distributions, an optimal deterministic mechanism never extracts any net payments from the agents, \ie it will be budget-balanced. Specifically, optimal mechanisms have a simple ``posted price'' or ``option'' form. In the bilateral trade environment, we obtain optimality of posted price mechanisms without any assumption on type distributions, thereby providing a rationale for confining attention to budget-balanced mechanisms.

Keywords: Mechanism design; private information; bilateral trade; budget balance; Myerson-Satterthwaite Theorem (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/74639/1/747435804.pdf (application/pdf)

Related works:
Journal Article: Optimal private good allocation: The case for a balanced budget (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:bonedp:032012

Access Statistics for this paper

More papers in Bonn Econ Discussion Papers from University of Bonn, Bonn Graduate School of Economics (BGSE) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().