Efficient compromising

Tilman Borgers; Peter Postl

doi:10.1016/j.jet.2009.01.011

Efficient compromising

Tilman Borgers, Peter Postl

Department of Economics

Research output: Contribution to journal › Article › peer-review

24 Citations (SciVal)

225 Downloads (Pure)

Abstract

Two agents must select one of three alternatives. Their ordinal rankings are commonly known and diametrically opposed. Efficiency requires choosing the alternative the agents rank second whenever the weighted sum of their von Neumann Morgenstern utilities is higher than under either agent’s favorite alternative. The agents’ utilities of the middle-ranked alternative are i.i.d., privately observed random variables. In our setup, which is closely related to a public goods problem where agents face liquidity constraints but no participation constraints, decision rules that truthfully elicit utilities and implement efficient decisions do not exist. We provide analytical and numerical results on second-best rules.

Original language	English
Pages (from-to)	2057-2076
Number of pages	20
Journal	Journal of Economic Theory
Volume	144
Issue number	5
Early online date	3 Jun 2009
DOIs	https://doi.org/10.1016/j.jet.2009.01.011
Publication status	Published - Sept 2009

Keywords

Arbitration
Compromise
Mechanism design without transferable utility

Access to Document

10.1016/j.jet.2009.01.011

author's accepted version
NOTICE: this is the author’s version of a work that was accepted for publication in Journal of Economic Theory. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in Journal of Economic Theory, vol 144, issue 5, 2009, DOI 10.1016/j.jet.2009.01.011
Accepted author manuscript, 1.54 MB

Cite this

@article{319f13d226004527b3b264037fda0f2d,

title = "Efficient compromising",

abstract = "Two agents must select one of three alternatives. Their ordinal rankings are commonly known and diametrically opposed. Efficiency requires choosing the alternative the agents rank second whenever the weighted sum of their von Neumann Morgenstern utilities is higher than under either agent{\textquoteright}s favorite alternative. The agents{\textquoteright} utilities of the middle-ranked alternative are i.i.d., privately observed random variables. In our setup, which is closely related to a public goods problem where agents face liquidity constraints but no participation constraints, decision rules that truthfully elicit utilities and implement efficient decisions do not exist. We provide analytical and numerical results on second-best rules.",

keywords = "Arbitration, Compromise, Mechanism design without transferable utility",

author = "Tilman Borgers and Peter Postl",

year = "2009",

month = sep,

doi = "10.1016/j.jet.2009.01.011",

language = "English",

volume = "144",

pages = "2057--2076",

journal = "Journal of Economic Theory",

issn = "0022-0531",

publisher = "Elsevier Academic Press Inc",

number = "5",

}

TY - JOUR

T1 - Efficient compromising

AU - Borgers, Tilman

AU - Postl, Peter

PY - 2009/9

Y1 - 2009/9

N2 - Two agents must select one of three alternatives. Their ordinal rankings are commonly known and diametrically opposed. Efficiency requires choosing the alternative the agents rank second whenever the weighted sum of their von Neumann Morgenstern utilities is higher than under either agent’s favorite alternative. The agents’ utilities of the middle-ranked alternative are i.i.d., privately observed random variables. In our setup, which is closely related to a public goods problem where agents face liquidity constraints but no participation constraints, decision rules that truthfully elicit utilities and implement efficient decisions do not exist. We provide analytical and numerical results on second-best rules.

AB - Two agents must select one of three alternatives. Their ordinal rankings are commonly known and diametrically opposed. Efficiency requires choosing the alternative the agents rank second whenever the weighted sum of their von Neumann Morgenstern utilities is higher than under either agent’s favorite alternative. The agents’ utilities of the middle-ranked alternative are i.i.d., privately observed random variables. In our setup, which is closely related to a public goods problem where agents face liquidity constraints but no participation constraints, decision rules that truthfully elicit utilities and implement efficient decisions do not exist. We provide analytical and numerical results on second-best rules.

KW - Arbitration

KW - Compromise

KW - Mechanism design without transferable utility

UR - http://www.scopus.com/inward/record.url?scp=68249107117&partnerID=8YFLogxK

UR - http://dx.doi.org/10.1016/j.jet.2009.01.011

U2 - 10.1016/j.jet.2009.01.011

DO - 10.1016/j.jet.2009.01.011

M3 - Article

SN - 0022-0531

VL - 144

SP - 2057

EP - 2076

JO - Journal of Economic Theory

JF - Journal of Economic Theory

IS - 5

ER -

Efficient compromising

Abstract

Keywords

Access to Document

Other files and links

Fingerprint

Cite this