Choosing Wisely: The Natural Multi-Bidding Mechanism
Is part ofCahier 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.
Publisher(s)Université de Montréal. Département de sciences économiques.
EHLERS, Lars, «Choosing Wisely: The Natural Multi-Bidding Mechanism», Cahier de recherche #2005-14, Département de sciences économiques, Université de Montréal, 2005, 27 pages.