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Efficient compromising

Börgers, T; Postl, P; (2009) Efficient compromising. Journal of Economic Theory , 144 (5) pp. 2057-2076. 10.1016/j.jet.2009.01.011. Green open access

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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.

Type: Article
Title: Efficient compromising
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jet.2009.01.011
Publisher version: https://doi.org/10.1016/j.jet.2009.01.011
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Arbitration, Compromise, Mechanism design without transferable utility
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
UCL > Provost and Vice Provost Offices > UCL SLASH
URI: https://discovery.ucl.ac.uk/id/eprint/10158034
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