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For the assignment problem where multiple indivis- ible items are allocated to a group of agents given their ordinal preferences, we design randomized mechanisms that satisfy first-choice maximality (FCM), i.e., maximizing the number of agents as- signed their first choices, together with Pareto- efficiency (PE). Our mechanisms also provide guarantees of ex-ante and ex-post fairness. The generalizedeager Boston mechanism is ex-ante envy-free, and ex-post envy-free up to one item (EF1). The generalized probabilistic Boston mech- anism is also ex-post EF1, and satisfies ex-ante ef- ficiency instead of fairness. We also show that no strategyproof mechanism satisfies ex-post PE, EF1, and FCM simultaneously. In doing so, we expand the frontiers of simultaneously providing efficiency and both ex-ante and ex-post fairness guarantees for the assignment problem.
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The Efficiency of Real-World Bargaining: Evidence from Wholesale Used-Auto Auctions
Abstract This study empirically quantifies the efficiency of a real-world bargaining game with two-sided incomplete information. Myerson and Satterthwaite (1983) and Williams (1987) derived the theoretical ex-ante efficient frontier for bilateral trade under two-sided uncertainty and demonstrated that it falls short of ex-post efficiency, but little is known about how well bargaining performs in practice. Using about 265,000 sequences of a game of alternating-offer bargaining following an ascending auction in the wholesale used-car industry, this study estimates (or bounds) distributions of buyer and seller values and evaluates where realized bargaining outcomes lie relative to efficient outcomes. Results demonstrate that the ex-ante and ex-post efficient outcomes are close to one another, but that the real bargaining falls short of both, suggesting that the bargaining is indeed inefficient but that this inefficiency is not solely due to the information constraints highlighted in Myerson and Satterthwaite (1983). Quantitatively, findings indicate that over one-half of failed negotiations are cases where gains from trade exist, leading an efficiency loss of 12–23% of the available gains from trade.
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- Award ID(s):
- 1530632
- PAR ID:
- 10198409
- Date Published:
- Journal Name:
- The Review of Economic Studies
- ISSN:
- 0034-6527
- Format(s):
- Medium: X
- Sponsoring Org:
- National Science Foundation
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- Free Publicly Accessible Full Text
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Accepted Manuscript1.0
- Journal Article:
- https://doi.org/10.1093/restud/rdaa007
