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A note on the inefficiency of bargaining over the price of a share

Author

Listed:
  • Athanassoglou, Stergios
  • Brams, Steven J.
  • Sethuraman, Jay

Abstract

We study the problem of dissolving a partnership when agents have unequal endowments. Agents bid on the price of the entire partnership. The highest bidder is awarded the partnership and buys out her partners' shares at a per-unit price that is a function of the two highest bids. We show that there exists no price-setting mechanism satisfying certain mild regularity properties that is ex-post efficient, for any common prior of valuations. This result sharply contrasts the equal-endowment case in which efficient dissolution of the sort we are examining is possible through a simple k-double auction, as suggested by Cramton, Gibbons, and Klemperer (Econometrica, 1987).

Suggested Citation

  • Athanassoglou, Stergios & Brams, Steven J. & Sethuraman, Jay, 2010. "A note on the inefficiency of bargaining over the price of a share," MPRA Paper 24807, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:24807
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    File URL: https://mpra.ub.uni-muenchen.de/26330/1/MPRA_paper_26330.pdf
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    Cited by:

    1. Ludwig Ensthaler & Thomas Giebe & Jianpei Li, 2014. "Speculative partnership dissolution with auctions," Review of Economic Design, Springer;Society for Economic Design, vol. 18(2), pages 127-150, June.

    More about this item

    Keywords

    Partnership Dissolution; Double Auction; Ex-Post Efficiency;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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