Article
A Subsidized Vickrey Auction for Cost Sharing
Journal of Mathematical Economics
(2018)
Abstract
It is well-known that there is no cost-sharing mechanism that is budget balanced, efficient, and dominant
strategy incentive compatible (DSIC). The Vickrey auction is DSIC and efficient, but raises surplus revenue.
In an environment where players have constant marginal values, we introduce a subsidized Vickrey
auction (SVA) that uses surplus revenue to offset some of the production costs. By compromising
efficiency, our SVA improves the players’ payoffs over the Vickrey auction. We show that the SVA is DSIC,
budget balanced, and value effective (awarding quantity only to the player who values it most), and it
Pareto dominates any other mechanism with these three properties. We demonstrate that there is no
welfare ranking between the SVA and the non-value effective serial cost-sharing mechanism.
Keywords
- Cosh sharing,
- Dominant strategy implementation,
- Vickrey auction
Disciplines
Publication Date
2018
Citation Information
Jesse A. Schwartz and Quan Wen. "A Subsidized Vickrey Auction for Cost Sharing" Journal of Mathematical Economics Vol. 77 (2018) p. 32 - 38 Available at: http://works.bepress.com/jesse_schwartz/12/