Choosing Wisely: The Natural Multi-Bidding Mechanism
Series/Report no.Cahier de recherche #2005-14
- (natural) multi-bidding mechanism
- [JEL:D62] Microeconomics - Welfare Economics - Externalities
- [JEL:D78] Microeconomics - Analysis of Collective Decision-Making - Positive Analysis of Policy-Making and Implementation
- [JEL:D62] Microéconomie - Économie du bien-être - Externalités
- [JEL:D78] Microéconomie - Analyse de prise de décision collective - Analyse positive de la conception et la mise en application de politique.
Pérez-Castrillo and Wettstein (2002) propose a multi-bidding mechanism to determine a winner from a set of possible projects. The winning project is implemented and its surplus is shared among the agents. In the multi-bidding mechanism each agent announces a vector of bids, one for each possible project, that are constrained to sum up to zero. In addition, each agent chooses a favorite a object which is used as a tie-breaker if several projects receive the same highest aggregate bid. Since more desirable projects receive larger bids, it is natural to consider the multi-bidding mechanism without the announcement of favorite projects. We show that the merits of the multi-bidding mechanism appear not to be robust to this natural simplification. Specifically, a Nash equilibrium exists if and only if there are at least two individually optimal projects and all individually optimal projects are efficient.
EHLERS, Lars, «Choosing Wisely: The Natural Multi-Bidding Mechanism», Cahier de recherche #2005-14, Département de sciences économiques, Université de Montréal, 2005, 27 pages.