In whose backyard? A generalized bidding approach

We analyze situations in which a group of agents (and possibly a designer) have to reach a decision that will affect all the agents. Examples of such scenarios are the location of a nuclear reactor or the siting of a major sport event. To address the problem of reaching a decision, we propose a one-stage multi-bidding mechanism where agents compete for the project by submitting bids. All Nash equilibria of this mechanism are efficient. Moreover, the payoffs attained in equilibrium by the agents satisfy intuitively appealing lower bounds. We are grateful to Mark Gradstein.and Moshe Justman for helpful comments. Pérez-Castrillo gratefully acknowledges financial support from the DGES PB97-018 and SGR96-75. Dep. Economía e H. Económica & CODE; Universitat Autònoma de Barcelona; Edifici B; 08193 Bellatera (Barcelona); Spain e-mail: [email protected] ++ Ben-Gurion University of the Negev; Department of Economics; Monaster Center for Economic Research; Beer-Sheva 84105; Israel e-mail: [email protected]