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). © 2010 Elsevier B.V
Athanasoglou, S., Brams, S., Sethuraman, J. (2010). A note on the inefficiency of bidding over the price of a share. MATHEMATICAL SOCIAL SCIENCES, 60(3), 191-195 [10.1016/j.mathsocsci.2010.08.003].
A note on the inefficiency of bidding over the price of a share
ATHANASOGLOU, STERGIOS;
2010
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). © 2010 Elsevier B.V
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