Efficient compromising
نویسندگان
چکیده
Two agents have to choose one of three alternatives. Their ordinal rankings of these alternatives are commonly known among them. The rankings are diametrically opposed to each other. Ex-ante efficiency requires that they reach a compromise, that is choose the alternative which they both rank second, if and only if the sum of their von Neumann Morgenstern utilities from this alternative exceeds the sum of utilities when either agent’s most preferred alternative is chosen. We assume that the von Neumann Morgenstern utilities of the middle ranked alternative are independent and identically distributed, privately observed random variables, and ask whether there are incentive compatible decision rules which elicit utilities and implement efficient decisions. We show that no such decision rules exist if the distribution of agents’ types has a density with full support. We also study the problem of finding second-best decision rules in our set-up, and explain how this problem differs from more familiar second-best problems. Finally, we give some numerical insights into the nature of second-best rules. For a variety of distributions of types, second-best rules involve very little inefficiency.
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ورودعنوان ژورنال:
- J. Economic Theory
دوره 144 شماره
صفحات -
تاریخ انتشار 2009