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A simple budget-balanced mechanism
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Journal Article
A simple budget-balanced mechanism
2018
Overview
In the private values single object auction model, we construct a satisfactory mechanism—a dominant strategy incentive compatible and budget-balanced mechanism satisfying equal treatment of equals. Our mechanism allocates the object with positive probability to only those agents who have the highest value and satisfies ex-post individual rationality. This probability is at least $\\left( {1 - \\frac{{\\text{2}}}{n}} \\right)$, where n is the number of agents. Hence, our mechanism converges to efficiency at a linear rate as the number of agents grow. Our mechanism has a simple interpretation: a fixed allocation probability is allocated using a second-price Vickrey auction whose revenue is redistributed among all the agents in a simple way. We show that our mechanism maximizes utilitarian welfare among all satisfactory mechanisms that allocate the object only to the highest-valued agents.
Publisher
Springer,Springer Berlin Heidelberg,Springer Nature B.V
