Dissolving a partnership dynamically

Van Essen, M; Wooders, J

Dissolving a partnership dynamically

Van Essen, M Wooders, J

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Publication Type:: Journal Article
Citation:: Journal of Economic Theory, 2016, 166 pp. 212 - 241
Issue Date:: 2016-11-01

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Field	Value	Language
dc.contributor.author	Van Essen, M	en_US
dc.contributor.author	Wooders, J https://orcid.org/0000-0002-4206-7137	en_US
dc.date.available	2020-05-25T19:11:37Z
dc.date.issued	2016-11-01	en_US
dc.identifier.citation	Journal of Economic Theory, 2016, 166 pp. 212 - 241	en_US
dc.identifier.issn	0022-0531	en_US
dc.identifier.uri	http://hdl.handle.net/10453/54807
dc.description.abstract	© 2016 Elsevier Inc. In financial disputes arising from divorce, inheritance, or the dissolution of a partnership, frequently the need arises to assign ownership of an indivisible item to one member of a group. This paper introduces and analyzes a dynamic auction for simply and efficiently allocating an item when participants are privately informed of their values. In the auction, the price rises continuously. A bidder who drops out of the auction, in return for surrendering his claim to the item, obtains compensation equal to the difference between the price at which he drops and the preceding drop price. When only one bidder remains, that bidder wins the item and pays the compensations of his rivals. We characterize the unique equilibrium with risk-neutral and CARA risk averse bidders. We show that dropout prices are decreasing as bidders become more risk averse. Each bidder's equilibrium payoff is at least 1/N-th of his value for the item.	en_US
dc.relation	http://purl.org/au-research/grants/arc/DP140103566
dc.relation.ispartof	Journal of Economic Theory	en_US
dc.relation.isbasedon	10.1016/j.jet.2016.08.006	en_US
dc.subject.classification	Economic Theory	en_US
dc.title	Dissolving a partnership dynamically	en_US
dc.type	Journal Article
utslib.citation.volume	166	en_US
utslib.for	1401 Economic Theory	en_US
utslib.for	1499 Other Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Economics Discipline
utslib.copyright.status	open_access
pubs.publication-status	Published	en_US
pubs.volume	166	en_US

Abstract:

© 2016 Elsevier Inc. In financial disputes arising from divorce, inheritance, or the dissolution of a partnership, frequently the need arises to assign ownership of an indivisible item to one member of a group. This paper introduces and analyzes a dynamic auction for simply and efficiently allocating an item when participants are privately informed of their values. In the auction, the price rises continuously. A bidder who drops out of the auction, in return for surrendering his claim to the item, obtains compensation equal to the difference between the price at which he drops and the preceding drop price. When only one bidder remains, that bidder wins the item and pays the compensations of his rivals. We characterize the unique equilibrium with risk-neutral and CARA risk averse bidders. We show that dropout prices are decreasing as bidders become more risk averse. Each bidder's equilibrium payoff is at least 1/N-th of his value for the item.

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http://hdl.handle.net/10453/54807