Divide and compromise

Antonio Nicolò, Rodrigo A. Velez
2017 Mathematical Social Sciences  
We introduce a symmetrized version of the popular divide and choose mechanism for the allocation of a collectively owned indivisible good among two agents when monetary compensation is available. Our proposal retains the simplicity of divide and choose and corrects its ex-post asymmetry. When there is complete information, i.e., agents know each other well, it implements in subgame perfect equilibria a unique allocation that would be obtained by a balanced market. By correcting the expost
more » ... try of divide and choose, our proposal may reduce welfare losses documented by laboratory studies for both divide and choose and auction-type mechanisms. JEL classification: D63, C72. Keywords: indivisible goods; no-envy; implementation in subgame perfect equilibria. * All errors are our own. Nicolò antonio.nicolo@unipd.it and antonio.nicolo@manchester.ac.uk; Velez rvelezca@econmail.tamu.edu 4 The online dispute resolution system ØØÔ »»ÛÛÛº ÖÓÙØÓÑ ×ºÓÑ» offers the intermediate price auction, i.e., α = 1 2 , under the Fair Buy-Sell system.
doi:10.1016/j.mathsocsci.2017.04.004 fatcat:5fwg4ijbl5eo5eyhb6ahxgdj2i