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Efficiency and budget balance in general quasi-linear domains

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  • Nath, Swaprava
  • Sandholm, Tuomas

Abstract

We consider efficiency and budget balance in general quasi-linear domains. Green and Laffont (1979) proved that one cannot generically achieve both. We consider strategyproof budget-balanced mechanisms with bounded valuations that are approximately efficient. We show that a deterministic, strategyproof, and budget-balanced mechanism must have a sink whose valuation is ignored in the decision, and is compensated with all the leftover money. We find a tight lower bound on the inefficiencies of strategyproof, budget-balanced mechanisms using this result. The bound shows that the inefficiency asymptotically disappears when the number of agents is large—we provide worst-case bounds and the best possible rate of convergence.

Suggested Citation

  • Nath, Swaprava & Sandholm, Tuomas, 2019. "Efficiency and budget balance in general quasi-linear domains," Games and Economic Behavior, Elsevier, vol. 113(C), pages 673-693.
    • Handle: RePEc:eee:gamebe:v:113:y:2019:i:c:p:673-693
    DOI: 10.1016/j.geb.2018.11.010
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    References listed on IDEAS

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    More about this item

    Keywords

    Quasi-linear preferences; Efficiency; Budget balance; Affine maximizer; Green–Laffont impossibility;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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