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A top-only mechanism with reserve price for single-good allocation problem

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  • Vikram, Aditya

Abstract

We study a model in which a single good is to be allocated among n agents who face a reserve price. We propose a top-only mechanism that is budget-balanced and dominant strategy incentive-compatible and “burns” some of the allocation probability at some valuation profiles. It allocates the good with non-zero probability only to the top agent. We show that the reserve price that maximizes the expected total welfare of agents is non-zero, and at the optimal reserve price the mechanism generates more expected total welfare than the mechanism of Mishra and Sharma (2018).

Suggested Citation

  • Vikram, Aditya, 2022. "A top-only mechanism with reserve price for single-good allocation problem," Economics Letters, Elsevier, vol. 217(C).
    • Handle: RePEc:eee:ecolet:v:217:y:2022:i:c:s0165176522002075
    DOI: 10.1016/j.econlet.2022.110646
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    References listed on IDEAS

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    1. Debasis Mishra & Tridib Sharma, 2018. "A simple budget-balanced mechanism," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 50(1), pages 147-170, January.
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    More about this item

    Keywords

    Budget-balanced mechanism; Reserve price; Single-good allocation;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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